The crisis is here – and it won’t go away anytime soon. The times of growth at any price, investment rounds in a fast-track process and poorly running startups that always conjure up new investors out of the hat are over. But there is no reason for despair.
The golden age of the German startup scene with millions of investments on the assembly line and a unicorn boom never before experienced in this country has come to an end. It is crisis! Ukraine war, inflation, energy price crisis – a lot is coming together at the moment. And the Corona pandemic with all its economic challenges has not yet been coped with by all of them. In short, the view into the future has not been so bad for a very long time. For many founders and investors, it is even the first crisis they are experiencing.
Number of large investments declining
A visible effect of this biggest crisis in more than a decade is the massive decline in very large investment rounds. For the first time in several years, there has been a classic summer slump in recent months. In August, we recorded just 11 large investments in Germany (from 10 million). In July there were 15. In June, at least, 24. Makes a total of 50 large investment rounds. In the previous year, we counted 79 million-dollar financings in the same period of the previous year.
Insolvencies are on the rise
Another visible effect of the current crisis is a noticeable wave of insolvency. In recent weeks and months, large and small startups such as Agrando, Nuri, Saiga, Vantik, GetFaster, Berlin Organics, Flimmer, 4scotty, SpiceNerds, CO2free, Biorena and realbest have slipped into insolvency. Above all, million-dollar bankruptcies such as those of Agrando, Nuri and Vantik are worth a look. After all, these young companies have been able to collect around 65 million venture capital in the past.
All in all, more startups have already failed this year than in previous years, but the financial damage is small. Especially when you consider that in January of this year alone, around 2 billion in around 30 investments flowed into local companies. In addition, we in Germany have been extremely spoiled in recent years when it comes to startup bankruptcies. Among the largest and most important startup bankruptcies (until 2019) are companies such as abracar, Homebell, Monoqi, Monedo, tausendkind and Zeitgold.
Startups lay off employees
Another visible effect of the current crisis is redundancies. More and more startups are cutting jobs. The goal is often to get through the current crisis well, sometimes best without another investment round. The Berlin Grownup Pitch just parted ways with 30% of its employees. “It’s increasingly clear that we’re heading into an extended recession. For that reason, we’ve made the painful decision to reduce the size of our team,” wrote founder Christian Reber about the layoffs.
At the same time, the Berlin-based farming unicorn Infarm parted ways with 50 employees. Meanwhile, the Viennese EdTech unicorn GoStudent directly cut 200 jobs. In addition, the company ceased its activities in the USA. The Berlin-based company Urban Sports Club previously parted ways with around 55 employees. The Berlin credit comparison service Smava also parted ways with around 100 employees. And ArtNight, Tier Mobility, Chronext, SoundCloud, SellerX, McMakler, Cosuno, Gorillas have also recently had to cut jobs.
No need to panic
Despite all this bad news, there is no need to panic. The German startup scene has simply been extremely keen on coke in recent years. A correction was long overdue. The times of growth at any price, investment rounds in a fast-track process and poorly running startups that always conjure up new investors out of the hat are over. Good teams, boom topics and a functioning business model continue to receive money.
Investors rely on ClimateTech
A good example is the many ClimateTech investments that have recently been reported. PropTech1, Speedinvest and Antler just invested 1.25 million in NeoCarbon. Green Generation Fund and Co. have just invested 6.5 million euros in Klim. Galvanize Climate Solutions, Aenu and Co. recently invested 10 million euros in alcemy. Atlantic Labs, Verve Ventures and Co. also invested 3.5 million euros in tozero. Carbon Removal Partners, Norrsken VC and former investor Picus Capital recently invested 4.2 million euros in Ceezer.
“A positive revolution”
There is no reason for a Götterdämmerung, a swan song to the German startup scene or even pure despair. “The coming quarters will be tough. Very hard even, probably,” wrote investor Christan Miele recently on Linkedin about the current situation. But he also sees no reason to despair: “I also see an opportunity for the start-up scene here: If we protect as many jobs as possible, adapt our business models to the crisis, prepare our companies for the future and, above all, navigate the challenges of the crisis on our own, without the help of the state, then the image of start-ups in Germany could experience a positive revolution.”