Business Angels: largest group of investors for German startups
Business angels are private individuals who invest their own capital in startups, either as individuals or through an investment company, and thereby usually acquire shares with the hope that they will increase in value. In addition, they support the young companies as contacts and advisors, which means that the companies benefit from the network and the expertise of the business angels. In Germany, business angels play an indispensable role and are often significantly involved in the success of young companies.
The Business Angel Report 2023 recently published by AddedVal.io and Google for Startups now provides interesting insights into the characteristics of German business angels. The report examined over 8,000 capital increases by 4,731 startups that were published in the German commercial register between July 2019 and December 2022. According to the report, there are 10,925 active German business angels in Germany who made 19,678 individual investments in 3,569 startups during the period under review. The importance of business angels for German startups is very clear in the report: at 78 percent, they represent the largest group of investors and are responsible for around 66 percent of all startup investments.
Male, around 50 years old and above average education
The majority of business angels who invest in Germany also come from Germany themselves. According to the report, of the 13,224 business angels who have invested in Germany over the past three and a half years, 83 percent are from Germany. Most foreign business angels come from Switzerland, followed by Great Britain and the USA. The report also provides interesting insights with regard to other demographic characteristics: “Angels are male on average (86.2 percent), around 50 years old and well educated.” The proportion of business angels who have a doctorate or professorship is 11.4 percent and is therefore above average. More than half of the 100 most active business angels in Germany were or are start-up founders themselves. According to the report, most business angels invest around 50,000 euros in the first round of financing, but there is a wide range. For the money invested, most business angels secure up to 2.5 percent of the company shares in the first round. If a venture capital fund also participates in the round, this proportion is usually significantly lower. 74 percent of all investments in the first round of financing by German startups come from business angels. According to the report, business angels remain the largest group of investors in all rounds, although the proportion decreases in subsequent rounds. On average, the startups close the first round of financing around 19 months after their foundation, with the second following around a year later. According to the report, 80 percent of German business angels only invested in one startup during the period under review. However, there are also business angels who invest in many companies. Flixbus founders Daniel Krauss, André Schwämmlein and Jochen Engert, for example, have invested in 42 companies with their company SEK Ventures.
Berlin the most popular city, Bavaria the most popular federal state
In addition to being very popular with start-up founders, Berlin is also the most popular hometown in Germany for business angels. 17 percent of business angels live in Berlin. At state level, Bavaria is the home of 24 percent of active business angels. According to the report, Bavaria “benefits a lot from the area around Munich (especially Grünwald and Graefelfing) and the district of Starnberg.” Business angel investments are mostly national: “55 percent of all angel investments are national, 58 percent of angel investments in Berlin come from outside.”
Medical and e-commerce most popular industries
According to the report, the medical and e-commerce sectors accounted for the largest share of all business angel investments at 26 percent. Investments in the last three years have increased the most in the areas of logistics, agriculture and environmental technology. The report assumes that green technologies could become more important in the future, as start-ups have risen sharply since 2021. Sectors also vary widely in terms of their median valuation as a result of the first round of funding. With a median valuation of 8.3 million euros, investors have the highest expectations for startups in the environmental technology sector, followed by finance with a median valuation of 7.1 million euros. According to the report, companies in these areas had particularly high scores because “disruption and innovation seemed particularly promising in these industries.” In the period under review, the CleanTech company 1komma5° was able to achieve the highest rating of around 436 million euros in the course of a first round of financing at the beginning of 2022. Business angels also played an important role here, with a number of business angels each investing 10 million euros.
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