German start-ups funding rises to €1.7bn in Q1 as AI captures majority of capital
German start-ups funding climbed to €1.7 billion in the first quarter, driven by a surge in AI investments and strong foreign participation, KfW reports.
KfW Q1 investment totals €1.7 billion
The state development bank KfW reported that German start-ups raised €1.7 billion in the first three months of the year, a 6 percent increase compared with Q1 2025. KfW said the rise was not the result of a few megadeals but reflected a broad-based, stable development across the market.
KfW chief economist Dirk Schumacher described the figures as evidence of continued investor confidence in the German technology and start-up ecosystem. He noted that the data show resilience despite wider macroeconomic pressures that have weighed on capital markets.
Foreign investors supplied more than three-quarters of funds
International capital played a decisive role in the quarter, with more than 75 percent of invested funds coming from abroad. That share is up from roughly two-thirds in each of the previous two quarters, underlining an increasing reliance on cross-border financing for German growth firms.
KfW highlighted the prominence of investors from the United States among foreign backers, reflecting the continued attractiveness of German innovation to transatlantic funds. Analysts say the inflow underscores the willingness of global investors to back European technology despite trade frictions and geopolitical uncertainty.
AI start-ups accounted for 58 percent of market value
Start-ups focused on artificial intelligence were the dominant force in the funding mix, raising €967 million across 71 financing rounds during the quarter. That sum represented 58 percent of the total market volume, well above the 2025 average share of about 43 percent.
KfW also pointed out the stark contrast with funding volumes seen abroad, where leading U.S. AI companies drew far larger sums in the same period. The bank contrasted the German total with figures showing that four major AI market leaders in the United States collectively secured roughly $188 billion in Q1, illustrating a wide gap in scale between markets.
Health and finance led in deal counts
By deal count, start-ups in the health sector registered the most transactions, accounting for 18 percent of deals in the quarter. Financial technology firms followed closely, representing just over 15 percent of all deals, signaling sustained investor interest in medical innovation and digital finance.
Observers say the concentration of deals in health and finance reflects investor appetite for sectors offering clear revenue models and regulatory pathways. Meanwhile, AI’s larger share of capital indicates that fewer but bigger rounds in AI are driving overall funding totals disproportionately.
Structural gaps limit domestic capital deployment
Despite the quarter’s growth, Germany’s venture capital base remains smaller than that of the United States on a per-capita basis. Earlier figures from industry groups indicate roughly €90 invested in venture capital per resident in Germany compared with approximately €510 per resident in the United States, a discrepancy that influences where fast-growing firms seek large funding rounds.
Large domestic institutional investors such as insurance companies continue to allocate only modest shares of their portfolios to venture capital, limiting a local pool of late-stage capital. As a result, many ambitious German start-ups look to U.S. investors for scale financing and sometimes pursue listings on American exchanges to access deeper capital markets.
The KfW data suggest a maturing German start-up scene that is nonetheless dependent on foreign liquidity to finance expansion. Policymakers and industry groups have for years debated measures to deepen domestic capital markets and encourage institutional investment, but substantial reallocation of savings into venture assets has yet to materialize.
Investors and founders interviewed by analysts say the quarterly figures will be watched closely as an indicator of momentum heading into the rest of the year. For now, KfW’s report paints a picture of steady fundraising activity, strong international interest, and a concentrated wave of capital flowing to AI — developments that could shape the next phase of growth for German technology firms.
