The business climate in the German venture capital market has experienced a decline, as indicated by the latest findings from the VC Barometer. The index, which is prepared quarterly by KfW Research, the German Private Equity and Venture Capital Association (BVK), and the Deutsche Börse Venture Network, shows a drop of 3.7 points to -4.1 balance points in the fourth quarter of 2024.
Venture capital investors have expressed a more negative view of the current business situation compared to the previous quarter. However, their expectations for future conditions have improved. Despite challenges, investors found it easier to raise capital during this period, marking an improvement in fundraising conditions for eight consecutive quarters. This positive trend is attributed partly to key interest rate cuts by the European Central Bank.
The sentiment regarding exits remains challenging but showed some improvement with an increase of 12.9 points to -22.2 balance points. Investors are showing increased willingness to make new investments, with expectations rising significantly.
However, there is growing dissatisfaction among investors concerning the quality and innovation of start-ups seeking capital compared to a year ago. Despite this, there is optimism that these aspects will improve.
Dr Georg Metzger from KfW Research noted that "the recovery in sentiment in the German venture capital market dipped at the end of the year," but he remains optimistic about future momentum due to improved expectations and easing fundraising and exit situations.
Ulrike Hinrichs from BVK added that "the current dip in sentiment was probably just a brief spell," pointing out investor optimism based on improving assessments of various factors such as fundraising and exits.
The report highlights potential for a successful venture capital year in 2025 as investor confidence appears poised for growth.