German start-up sentiment hits lowest level since 2020

Sentiment among German start-ups has dropped to its lowest level since the onset of the Covid-19 pandemic in 2020, according to a study by the German Start-up Association.

The report cites a stagnating economy and reduced innovation spending by established firms as key challenges. "Similar to the first year of the pandemic, start-ups are suffering from uncertainties and associated market caution," the association said.

The start-up business climate index fell from 39 points in 2024 to 31.7, roughly the same level as 2020. The index combines assessments of current conditions and future expectations.

The findings are based on the German Start-up Monitor, which surveyed 1,846 companies between June and August.

Almost half of start-ups rated their current situation as only satisfactory, 15% said it was poor, and 35% good. Yet more than half, 52%, expect business to improve over the next six months.

Despite economic uncertainties, confidence in their innovation capacity and long-term growth prospects remains strong, said Verena Pausder, chair of the association.

Access to investment has improved slightly, but Germany lags global peers.

Since early 2023, start-ups in the US have received roughly four times the investment relative to gross domestic product, GDP, three times in the UK, and 1.5 times in France.

The association called for decisive government support for start-ups.

Meanwhile, the number of unicorns - start-ups valued at over USD1 billion - has grown to 31, driven in part by artificial intelligence, AI. In 2019 there were just 11 such companies, rising to 28 in 2024.

Top German start-ups include AI translation service DeepL, neobroker Trade Republic, and defence firm Helsing.