AI and defence tech boom lifts German start-up funding

Tech companies in Germany are expected to receive around $7.4 billion in funding this year, about 10% more than in 2024, venture capital firm Atomico said in its annual State of European Tech report.

That would make Germany the second-largest destination for venture funding in Europe after the United Kingdom. Across Europe, venture capital investment is forecast to grow by 7% to $44 billion.

Atomico partner Tom Wehmeier said technology has moved far beyond being a single industry and now drives change across government, defence, energy, finance and healthcare.

Deep-tech and AI firms accounted for 36% of all European venture capital funding, the report said.

Investment in defence-related technology rose 55% to $1.6 billion, led by Munich-based Helsing, which specializes in AI for defence companies and raised about $660 million in June.

The report also notes that German investors are gaining ground. While London still dominated the European venture capital landscape in 2024, hosting eight of the region's 10 largest funds, three German funds have climbed into the top 10 this year.

Atomico expects around €14 billion to be invested in AI across Europe in 2025. The continent has produced prominent AI companies such as Cologne-based DeepL, Heidelberg's Aleph Alpha and Stockholm-based Lovable.

However, the United States remains far ahead, with an estimated $146 billion flowing into AI this year, which is more than 10 times the European level.