July 27, 2023

VC funding in DACH on the road to recovery, reveals new data

After falling for four consecutive quarters, funding for DACH startups has risen for three quarters through Q2 this year

VC funding in the DACH region is showing early signs of recovery after a year of economic turbulence, reveals a new report from B2B growth investor NGP Capital, a backer of travel experiences platform GetYourGuide, language learning app Babbel and period tracking app Clue.

After falling for four consecutive quarters, funding for DACH startups has been on the rise since Q4 2022 — and investors are anticipating this will be an upward trend for the rest of the year.

“I don’t think we will see another decline or major funding slowdown. In fact, we expect the public markets to open up by the end of Q4/Q1 2024 and this will increase investor appetite and funding levels,” says Christian Noske, Berlin-based partner of NGP Capital.


He adds that investors are less concerned with annual growth rates, and more focused on whether a company is growing efficiently with “the potential to break even”, which means that companies will still be able to attract funding even if they're not growing like wildfire. 

Interestingly, Germany’s funding levels dropped less than other European markets of a similar size, namely France and the UK, between the first half of 2022 and the same period in 2023. 

VC funding in Germany dropped 37%, compared to 40% in the UK and 54% in France. 

Germany leads the pack

Germany has historically dominated VC funding in the DACH region, which is showing no signs of changing.

During the year between Q3 2022 and Q2 2023, 72% of the total venture funding in the DACH region was invested in German startups, compared with 23.4% in Switzerland, 4% in Austria and 0.6% in Liechtenstein.

Funding in Germany is showing a strong uptick after a rocky year, having reached $2.9bn in Q2 of this year. While that's a 25% decrease in funding compared to Q1 2022, it still reflects strong performance, the report says.

Austria and Switzerland suffer

The other markets in DACH are showing fewer signs of recovery.

After peaking at $2bn in Q2 2022, funding in Switzerland has tumbled to just $700m in Q2 of this year. Austria raised just $0.1bn in Q2 this year.

“Switzerland and Austria are less mature ecosystems than Germany and don’t yet enjoy its market robustness,” says Noske, adding that the funding slowdown, regulatory complexity, access to growth capital and talent retention are problems for DACH companies across the board.

“That said, Switzerland has enormous potential due to its strong talent base in AI and industrial technologies, and international talent continues to be attracted into the country by talent hubs like ETH Zurich.

Hot sectors in DACH

And, yes, generative AI is hot in DACH too. Startups in this sector attracted more funding ($248m) in Q2 2023 than they did during the whole of 2022 ($210m).

Travel, food and healthtech startups also caught the eyes of investors in the first half of 2023.

Funding in travel increased by 52% in H1 2023 compared to H1 2022. Foodtech funding increased by 38% and life sciences funding increased by 5%.


Meanwhile, software-driven sectors such as enterprise software, cybersecurity and fintech — areas that the DACH region has traditionally been strong in — have experienced steep declines in funding.

Nevertheless, Noske expects that the next year will yield the next generation of companies in the robotics, spacetech and enterprise software sectors — many of which will be powered by GenAI.

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on Twitter and LinkedIn