AI start-ups receive more venture capital

How much are AI start-ups benefiting from the inflow of capital?

The German start-up sector is seeing a noticeable bright spot in the venture capital market. Growth companies received 1.7 billion euros from investors such as funds and corporations in the first quarter, according to the development bank KfW. This corresponds to an increase of 6% compared with the first quarter of 2025.

Remarkable here is the structure of the growth. The development was not shaped by a few large individual transactions. The statement says: “The investment volume was not driven by individual mega-deals, but resulted from stable development across the breadth of the market.”

This points to a market that was able to mobilize additional funds despite high uncertainty surrounding the Iran war and the economic outlook. For the start-up scene this is an important signal, even though the international gap remains considerable.

International investors are gaining importance

Foreign capital providers played a key role in the first quarter. More than three quarters of the invested funds came from abroad. In the two preceding quarters, the share was around two thirds in each case.

Above all, investors from the United States became more prominent. KfW chief economist Dirk Schumacher puts this development into context against the backdrop of the geopolitical situation: “The consistently strong interest from abroad in German start-ups is anything but a given in light of ongoing trade and geopolitical risks.”

Schumacher sees this as a sign of the attractiveness of Germany as a location. It shows the continued confidence of international capital providers in Germany as a technology and start-up hub.

Which sectors are closing the most deals?

Most funding rounds in Germany went to start-ups in the healthcare sector, which accounted for an 18% share. They were followed by financial firms with just over 15%.

However, the boom around artificial intelligence had a particularly strong impact. German start-ups with AI-based applications raised a total of 967 million euros in 71 funding rounds in the first quarter. This meant that 58% of the total market volume went to AI start-ups.

For comparison: on average in 2025, the AI share of the market volume was around 43%. The increase shows how strongly artificial intelligence is currently shaping investment decisions in the German start-up sector.

Why is Germany lagging behind in venture capital?

Despite the growth, international comparisons reveal significant weaknesses. In the United States, according to KfW figures, just four AI market leaders alone raised a combined total of 188 billion USD in the first quarter. AI start-ups in the United Kingdom and France also secured billion-euro funding rounds.

This means Germany is falling behind when it comes to large financing volumes. Although the start-up sector has grown significantly in recent years, German start-ups often rely on American investors for large amounts. Up-and-coming companies are also frequently drawn to U.S. stock exchanges.

Previous data from the Start-up Association illustrates the scale: In Germany, the equivalent of 90 EUR per capita is invested in venture capital. In the United States, the figure is 510 EUR and thus almost six times as much.

Rising interest rates as a risk for the market

Another source of uncertainty is rising interest rates driven by inflation concerns. From KfW’s perspective, they could make it more difficult for venture capital investors to raise new funds.

The structure of institutional investors also plays a role. Large investors such as insurance companies in Germany often invest only to a limited extent in venture capital. As a result, the financing base here is more restricted than in the United States.

The AI boom is certainly creating momentum, but it does not automatically change the structural differences. The figures show that German AI start-ups are gaining in importance, but in the global competition for capital, the gap to the leading markets remains large.

With material from dpa