The recently published German Startup Monitor 2025 (DSM) paints a picture characterised by remarkable innovative strength and, at the same time, painful bottlenecks. Despite the recession and tense economic situation, the German start-up scene is a driving force for modernisation, powered by future technologies such as artificial intelligence. However, a look at the financing figures shows that the location is unable to exploit its full potential.
Germany is catching up – thanks to AI and deep tech
One of the most surprising developments is that 40% of founders now consider Germany to be more attractive than the United States – a clear sign of confidence in the domestic location. This momentum is closely linked to technological progress: for almost half (45%) of start-ups, artificial intelligence (AI) is now a core component of their product. This is a clear increase over the previous year and underlines the enormous momentum in the deep tech sector, where the defence tech segment also recorded record investments of almost €900 million.
There is also cautious optimism when it comes to diversity: after the proportion of women in founding teams declined last year, it is rising slightly again this year from 19% to 20%. This slight upward trend is an important signal for a more inclusive start-up landscape. At the same time, there is a clear need for international talent, as 32% of start-up employees now come from abroad. The German start-up scene is therefore becoming increasingly female and international, which strengthens its innovative power.
The proportion of female founders: a slight upward trend in the international ecosystem
Within Germany’s dynamic start-up scene, the development of the proportion of female founders is always an important indicator of progress and inclusion. The German Start-up Monitor 2025 does not provide any revolutionary signals in this regard, but it does provide important positive ones: after the proportion of women in founding teams declined last year, it is rising slightly again this year, from 19% to 20%. This slight increase is an encouraging sign that efforts to promote diversity in the ecosystem are slowly bearing fruit, even if parity is still a long way off.
Empowering female founders is not only a matter of equality, but also a decisive economic factor. Nevertheless, the challenge of financing female-led start-ups remains acute throughout the ecosystem. One of the main reasons why founders would generally move abroad to start a new business is better access to capital (71%) – a hurdle that is often even higher for female teams. In order to increase the proportion of female founders in the long term, strong female role models are needed, as well as a stronger anchoring of entrepreneurship in the education system and a comprehensive improvement in work-life balance offerings. For women, the aspect of balancing family and entrepreneurship is often a central hurdle to starting a business, as they often perform a significantly higher proportion of care work.
The capital gap and lack of cooperation are slowing down growth
The biggest drawback of DSM 2025 is the continuing gap in financing. Although around €5.4 billion flowed into German start-ups in 2025, this is too little by international standards. In terms of economic performance (GDP), Germany ranks only 18th among the top economies in terms of VC investments. The gap between Germany and the US and its European neighbours remains considerable. The financing cycle is also stagnating, as there has been no initial public offering (IPO) of a German unicorn since 2022.
The decline in partnerships is also alarming: cooperation between start-ups and established businesses has fallen from 62% to just 56%. Start-ups in particular are often early adopters of efficiency technologies such as AI – a potential that SMEs and industry urgently need to exploit.
Added to this is the continuing ambivalence among founders: although 78% would start a business again, the willingness to do so is declining. The main reasons for choosing to start a business abroad remain less bureaucracy (88%) and better access to capital. Digitalisation also remains a work in progress: 81% of founders consider the digitalisation of administration to be low.
Our outlook: leveraging momentum, eliminating bottlenecks
The German Startup Monitor 2025 sends a clear signal: the attractiveness of the location is increasing, supported by technological excellence and a slight increase in the number of female founders. However, for Germany to become a start-up nation, politicians must urgently address two issues: massively reducing bureaucracy and significantly deepening the capital market. Only then can the innovative power of AI and deep tech be fully unleashed and Germany realise its full potential as a business location.