Germany’s AI Start-up Landscape: A Boost from the Global AI Boom

The global AI boom is providing a boost to Germany’s fledgling AI ecosystem, with AI start-up numbers and investment levels continuing to increase thanks to public funding and venture capital injections.

Germany’s economy is enjoying a boost thanks to continued domestic AI market growth. According to KfW Research, German AI start-ups raised more capital (EUR 568 million) than non-AI start-ups in Q2/24. Domestic investors are also committing to AI, with German investment up to 39 percent of total investment compared to 26 percent in Q1/24.

The recently published “German AI Start-up Landscape 2024” study conducted by the AppliedAI Institute for Europe on behalf of Wirtschaftswoche records a 35 percent increase in the number of AI start-ups in the country – rising from 508 to 687 in just 12 months. Moreover, AI start-up survival rates are higher than those of non-AI start-ups; with 467 AI start-ups listed in last year’s report still actively trading. Noteworthy is the fact that just 10 percent of these AI start-ups went into liquidation. Seventeen percent of those AI start-ups no longer on the list were acquired, 49 percent moved their headquarters outside of Germany (typically to the USA), and 24 percent were removed as they were now 10 years or older.

According to report author Philip Hutchinson, Senior AI Strategist at the AppliedAI Institute for Europe, the diversity of industries and sectors in which new AI companies are active is striking. “From production to research and development to customer service – German AI start-ups are developing solutions for many complex applications.” German AI Start-ups are, in the main, not building chatbots or building optimized language models but instead focusing on developing tailored AI solutions in the B2B market. Generative AI – most recently popularized in the public imagination by OpenAI’s ChatGPT – nevertheless remains one leading AI development area, with the number of German AI start-ups rising correspondingly: one in five German AI start-ups is working to develop generative AI solutions.

According to the German AI Start-up Landscape report, a total of around EUR 1.2 billion was invested in German start-ups in 2023. Berlin and Munich continue to show the way, with the two cities enjoying approximately 50 percent of all new domestic AI start-up volume. However, the report finds that other urban sites including Hamburg, Karlsruhe, Stuttgart, Cologne, Darmstadt, Aachen, Düsseldorf, and Frankfurt are recording significant growth numbers.

The authors of the German AI Start-up Landscape 2024 report conclude that while Germany’s AI ecosystem and start-ups have benefited from the current global AI hype, public funding for start-ups and significant venture capital flow into AI companies have also proven decisive and are indicators of a functioning and healthy AI ecosystem.