Sharp decline in large financing rounds for German start-ups due to COVID-19: study

More German start-ups received new assets in the first half of 2020 as the number of financing rounds rose by 8 percent year-on-year to 360, according to a study published by consulting firm Ernst & Young (EY) on Monday.

   However, "major transactions, which in 2019 had still set financing records, were hardly seen anymore" and the total investment volume fell by 22 percent to 2.2 billion euros (2.49 billion U.S. dollars), according to the EY start-up barometer.

   "There is clearly a COVID-19 effect in venture-capital investments," said Thomas Pruever, partner at EY. "The most obvious development is the sharp decline in very large deals."

   The number of transactions with a volume of more than 100 million euros fell from seven to two compared to last year. At the same time, there had been more small volume transactions. "The coronavirus effect is therefore less massive than initially feared," added Pruever.

   With 250 million euros, Munich-based air taxi developer Lilium received the largest investment sum in the first six months, followed by a 195-million-euro financing for Berlin-based rental company of technical equipment Grover, according to the EY study.

   The lack of very large transactions was "particularly noticeable" in the start-up scene of German capital, where investment volumes during the period fell by 47 percent year-on-year to 1.1 billion euros, according to EY.

   Overall, the focus of investment activity in Germany "shifted significantly," EY noted. While the software and analytics sector grew strongly, significantly less money was invested in mobility start-ups and finance technology.

   Software as a Service (SaaS), analytics and artificial intelligence (AI) would offer "promising business ideas, also and especially in pandemic times," said Pruever.