German startups based in Bavaria raised more money than their counterparts in Berlin for the first time ever in 2024.
Berlin has long been Germany’s fundraising champion, but thanks to the recent popularity of deeptech startups and some hefty raises from a couple of big startups, Bavaria – home to tech hub Munich and other cities – raised more money in 2024 than those in Berlin, according to a new report by consultancy Ernst & Young.
The report found startups in Bavaria raised over €2.3bn in 2024, compared to Berlin startups’ €2.2bn. However, Berlin still trumps Bavaria for the number of deals signed, with 256 compared to Bavaria’s 164 last year.
According to the EY report, the “financing volume for startups in Bavaria and North Rhine-Westphalia increased by more than €600m each compared to 2023,” while the “volume for Berlin startups fell by €200m.”
Some Munich-based startups raised large rounds last year, including AI defence tech Helsing’s €450m raise last summer, spacetech The Exploration Company’s €150m raise and rocket launcher Isar Aerospace’s $70m Series C extension. The region is also home to some of Germany’s most valuable unicorns including process mining company Celonis and HR tech Personio.
The California of Europe?
Berlin and Bavarian capital Munich have long been pitted against each other as rival startup ecosystems. Berlin tends to be seen as Germany’s trendy software hub — home to fashion retailer giant Zalando and delivery giants HelloFresh and Delivery Hero — while Munich has earned its stripes in the last few years as the country’s deeptech powerhouse.
“When Berlin was poor but sexy, it was the best place in the world to build a consumer internet company, and run low cost staff, heavy e-commerce, marketing and customer support in 100 languages from a central place. Berlin’s cost of living, culture and energy contributed greatly to that,” says Claudius Jablonka, general partner at Palo Alto and Munich-based VC Leitmotif.
“Today, B2B investing is much much bigger than B2C, and especially deep tech and hardware investing is much bigger than soft tech. Munich wins in these new hot themes for talent and access to customers.”
On the talent side, many professionals have industry experience from corporations and Big Tech; Google, Apple and Microsoft all have a hub in Munich. Also, two of Europe’s top universities — LMU (Ludwig Maximilian University of Munich) and TMU (Technical University of Munich) — are in Munich, adds Jablonka. CDTM, a joint study program between both universities with 25 people per class, has 9 unicorns as alumni.
On the customer side, seven companies listed on the DAX index, among the 30 biggest German companies traded on the Frankfurt Exchange, are headquartered in Munich a benefit for companies selling B2B.
In the state of Bavaria, the local ministry has been putting a lot of emphasis on bolstering the startup scene, with minister president Markus Söder claiming in January 2024 that Bavaria had all the ingredients to become the “California of Europe.”
In 2019, Bavaria launched the Hightech Agenda initiative with a €5.5bn investment commitment for new technologies like AI, quantum and space. The state’s digital ministry also told Sifted last year that it has hopes to create a Bavarian version of France’s Tibi programme — a government initiative that, since 2019, has unlocked billions of euros of institutional investors’ money for VC funds.
UnternehmerTUM, the Munich-based accelerator which counts many of Germany’s unicorns as alumni and topped the FT-Statista ranking of Europe’s leading startup hubs in 2024, T is being used as a template to create other hubs of its kind across other regions of Germany as part of the German government’s Lighthouse competition.
Read the orginal article: https://sifted.eu/articles/bavaria-overtakes-berlin-in-startup-funding-news/
