Increasing volume of venture capital deals accelerates the maturation of the German startup ecosystem

Market study 2021: Insights on valuation practices, legal arrangements and ESG considerations during funding rounds.

Your expert for questions

Enrico Reiche

Enrico Reiche
Director, Transaction Consulting and Valuation,
PwC Germany
Tel: +49 1511 6781604

Increasing maturity leads to more and more success of startups

In the 2nd edition of our market study, we confirm various findings from the previous year and the trend to a more mature market. The results draw a picture of the German venture capital ecosystem that is consistent with last year’s study exemplary in terms of targeted shares ratios, share of employee stock options (ESOP) and preferred valuation methods. Based on a broad and in-depth survey of investors, this study creates a unique database for Germany, enabling benchmarking and better decision-making. It allows us to draw conclusions about negotiation processes and the motives behind them and aims to increase transparency across the ecosystem.

While last year’s study included several questions focusing on Covid-19, this year’s spotlight is on ESG-related topics. We assign a high relevance to this subject and generated some interesting findings.

“Our deep dive into the (C)VC-Ecosystems confirms increased financing rounds, decreased expected IRRs, cash-flow rights as liquidation preference and anti-dilution clauses with more founder friendly design. As a result, startups and their founders/managers have more space for their passion and potential to create the next unicorns, as we can see in the market.”

Dirk Honold, TH Nürnberg

The study at a glance

Current ecosystem developments lead to a more mature market

Financing rounds are getting bigger. Moreover, our study shows that CVCs usually invest lower volumes per deal than classical VCs. Higher valuations are in line with lower expected IRRs. IRR and Multiple-wise, expectations for portfolio companies are lower in later stages. Additionally, VCs expect higher Money Multiples and Return Rates than CVCs, regarding their single portfolio companies.

More non- than participating liquidation preferences confirm valuation trends. There has been increasing interest in BioTech, shifting the focus from Industry 4.0 compared to last year’s result. Additionally, most investors predominantly focus on B2B business.

Infographic: Investment volume per deal

Key valuation drivers and negotiation factors

Investors still rely heavily on their personal investment experience when qualitatively assessing targets, especially in the early stages. It is only in the later stages that other factors become more decisive, such as product or service in particular.

Value creation impact starts especially in the early stage with the deal-flow and is above all phases dominated by the deal selection. As it could be expected, value added by the VC-Management is more important in the early stage, as is exit management in the later stage.

Most investors are willing to negotiate on dividends, valuation, investment amount and option pools – on the other hand, share ratio, drag along and pro rata rights and liquidation preferences are less likely to be negotiable. Founder-friendly broad based anti-dilution is used more often than full ratchet anti-dilution.

“There is a visible trend towards more founder-friendly clauses, so investors are less likely to negotiate here. However, founding teams can negotiate specifically on valuation and the investment amount.”

Patrick Hümmer, Ventury Analytics

Presence of ESG in the German ecosystem and the German “Zukunftsfonds”

Our respondents show reasonable awareness for ESG within investment and portfolio management processes. ¾ of those who do not yet include ESG into the process are currently developing respective strategies. Still, processes regarding the screening of ESG compliant targets are only partially standardized, with only about 4 % of respondents having a fully standardized procedure here.

Infographic: Do you currently consider ESG criteria in your investment process? (n=39)

Apart from screening, there is still room for improvement on ESG: It is neither part of the valuation for most of the respondents, nor is it included into the funds reporting (yet).

Infographic: Are you planning to consider ESG in the future for the investment process? (n=13)

The “Zukunftsfonds” established by the German government is not considered to be of great impact by most of the participants.

“The 2nd edition of the VC Market Study again increases transparency in startup financing details to support decision making during the transaction process. As the majority believe that incorporating ESG compliance will have a significant positive influence on exit valuations, a standardized inclusion of these ESG criteria during the entire investment cycle will be a key success factor in the future.”

Enrico Reiche,Director, Transaction Consulting and Valuation, PwC Germany


For this market study, PwC, Ventury Analytics GmbH and Professor Dirk Honold (Technische Hochschule Nürnberg) surveyed German and foreign investors in startups whose investment strategies are focused on the German market or who have concluded deals in Germany. Across the total of 80 questions, asked during the summer of 2021, a maximum of 64 investors participated in the study. The total calculated investment volume covered by these investors amounts to more than €2 billion per year.

Authors of the study

Prof Dirk Honold

Prof Dirk Honold, Technische Hochschule Nürnberg

With a background of more than 20 years’ experience supporting tech companies in roles including CFO, and following several dozen funding rounds including IPOs, Prof Honold is now a serial entrepreneur and coach, serving on supervisory boards and advisory boards. His academic work focuses on strengthening the startup finance ecosystem through innovation funding, VC and CVC, and on value-oriented leadership with potential for the future. Besides his academic work, Prof Honold also helps strengthen the startup finance ecosystem by providing academic leadership to the Schmalenbach-Gesellschaft e. V. society for business administration, among others.

Patrick Hümmer

Patrick Hümmer, Ventury Analytics GmbH

As a co-founder and CEO of Ventury Analytics GmbH, Patrick Hümmer carries out in-depth analysis and simulations to support the process of structuring and arranging VC funding rounds, aided by specialist consulting software. This provides economic decision-making aids in this process for startups, VCs, CVCs and law firms, enabling unambiguous, quantitative documentation of investment contracts.

Enrico Reiche

Enrico Reiche, Director, Transaction Consulting and Valuation, PwC Germany

With more than thirteen years’ experience in transaction consulting, Enrico Reiche is currently both a Co-Lead in the Venture Deals team, the Leader of the Raise programme at PwC Germany and core team member at PwC’s CVC Center of Excellence. His expertise in venture deals, VC and CVC, along with his professional network, enable him to create added value for startups, investors and established companies alike.

Gerhard Wacker

Gerhard Wacker, Partner im Bereich Corporate/M&A, PwC Legal Germany

Gerhard Wacker is a partner at PwC Legal and works in the Corporate/M&A practice with a focus on legal advice for venture capital transactions. He has more than 18 years of experience in VC/PE as well as M&A. He is responsible for leading the Corporate/M&A teams in Berlin and Nuremberg and is co-leader of the Corporate/M&A practice group of PwC Legal Germany. Juve (2020/2021) lists him as “Leading Advisor for Venture Capital”.

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Enrico Reiche

Enrico Reiche

Director Transaction Consulting and Valuation, PwC Germany

Tel: +49 30 2636-2119

Gerhard Wacker

Gerhard Wacker

VCs / M&A, PwC Germany

Tel: +49 911 94985-281

Dr. Tim Blume

Dr. Tim Blume

Venture Deals, PwC Germany

Tel: +49 (0)1751483055