Investor sentiment in the German venture capital market has declined sharply due to ongoing geopolitical uncertainty, according to the latest findings from KfW Research. The venture capital sentiment indicator fell by 17 points in the second quarter of 2025, reaching -18.8 balance points. This marks a significant drop below the long-term average.
The quarterly VC Barometer, prepared by KfW Research together with the German Private Equity and Venture Capital Association (BVK) and the Deutsche Börse Venture Network, reports that both current business assessments and six-month expectations have worsened considerably. The close gap between these indicators suggests that an improvement in business conditions is unlikely in the near future.
“Geopolitical events have brought great uncertainty,” said Dr Dirk Schumacher, Chief Economist of KfW. “They are the main reason business sentiment slumped noticeably at the beginning of summer”.
The climate for fundraising also weakened notably during the first half of 2025, after having recovered at the end of 2024. This shift highlights increasing challenges for investors seeking new capital.
A similar negative trend was observed in exit opportunities for investors, which saw a significant decline of 21.7 points in the second quarter. This reflects reduced confidence among venture capital providers about exiting investments profitably.
Despite these challenges, investment activity within Germany’s VC market remained steady and robust during this period. Deal volumes held firm and even increased overall. Expectations for other indicators declined, but optimism about continued investment activity persists.
“Contrary to what the sentiment trend is suggesting, investment activity did develop positively. Attractive investment opportunities still appear to exist but are seen as too expensive by many investors in light of the high uncertainty,” said Schumacher.
“What we need now, both nationally and internationally, is reliable economic policy decisions. That would calm the situation and restore confidence in the capital markets.”
Ulrike Hinrichs, Executive Board Member at BVK, commented: “Venture capital investors appear to be keenly aware of the geopolitical uncertainties and VC-specific problems in the capital market. Nonetheless, we still have good reason to hope that sentiment will shift towards a recovery again by the end of the year. International investors have a growing interest in Europe, which is directing additional capital to the continent.”
KfW produces its quarterly German Venture Capital Barometer together with BVK and DBVN exclusively for Handelsblatt.