From Berlin to Zurich: NGP Capital’s Research on VC Funding in the DACH Region | Startuprad.io
Executive Summary
Welcome to Startuprad.io, the podcast that brings you the latest insights and stories from the world of startups. In today’s episode, we have a special guest, Christian Noske, a Partner at NGP Capital in Berlin. Christian joins our host, Jörn “Joe” Menninger, to discuss their recent research on the startup ecosystem in the DACH region, which encompasses Germany, Austria, and Switzerland. They delve into the findings of NGP Capital’s analysis, which explores the impact of COVID-19 on venture funding in the region and highlights some surprising facts about the different countries. Tune in to discover why Switzerland has emerged as a strong force in the startup scene, how Germany’s diverse ecosystem mitigated the decline in funding, and the reasons behind France’s larger drop in startup funding. If you want to uncover the hidden gems and thriving startups beyond the well-known hubs, this episode is a must-listen. Stay tuned for an in-depth conversation on the startup landscape in the DACH region with Christian Noske of NGP Capital.
“Germany has a long history and is well positioned to be part of that AI race, whether that’s open source, which really, a lot of the open source history, was born in Germany. But also there were always a lot of applications developed around nation whether that’s robotic on the very industrial hardware savvy side or on the software side, where AI was leveraged For for all kinds of things.” — Christian Noske — Partner — NGP Capital (Berlin)
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Questions Discussed in the Interview
- How does NGP Capital define venture funding and what factors do they consider when analyzing its trends?
- According to the research conducted by NGP Capital, how has venture funding in the DACH region (Germany, Austria, Switzerland) been affected post-COVID?
- Which country in the DACH region showed the least decline in venture funding and why do you think that is the case?
- What surprising facts did NGP Capital discover about the startup ecosystems in Switzerland, Austria, and Germany?
- How does the university ecosystem in Switzerland contribute to its strong startup ecosystem?
- Which industries experienced the biggest rebound in terms of startup funding after the COVID pandemic and why do you think that is the case?
- Why do you think Germany’s startup ecosystem is more diverse and spread out compared to France’s more centralized ecosystem?
- How does Germany’s diverse startup ecosystem contribute to its ability to weather declines in funding?
- How does the language barrier impact international investors’ ability to invest in the DACH region compared to other European countries?
- Can you provide specific examples of lesser-known cities in Germany that have thriving startup scenes and highlight some of the successful startups based there?
The Importance of International Funding: “Yes, international funding is so important for so many reasons. German startup doesn’t wanna stay in the German market. So how do you actually get out there? One source and one input here certainly is, international investors, people who understand the market and know how to create a company in the US. So I’m super hopeful actually that this continued.” — Christian Noske — Partner — NGP Capital (Berlin)
The Video Interview is set to go live on Thursday, October 12th, 2023
“Switzerland’s Astonishing Startup Ecosystem: They are really punching over the weight line for the size of the country and the ecosystem.” — Christian Noske — Partner — NGP Capital (Berlin)
The Audio Interview is set to go live on Thursday, October 12th, 2023
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Maybe Germany is a bit more mature than Switzerland and Austria. But also if you look at the diversity, both in regions, it’s not just Berlin, it’s also, Munich, Stuttgart, Cologne, it’s a lot of areas, and the topics are also very diverse. So, obviously, everybody could see how certain technologies like Fintech took a big dip. And if Germany were all Fintechs, then it would look very different. But Germany is all about, climate tech, all about robotics, all about topics that are maybe More hot this year than last year.” — Christian Noske — Partner — NGP Capital (Berlin)
The Investor
Christian Noske (https://www.linkedin.com/in/christian-noske/) is a Partner at NGP Capital (https://www.ngpcap.com/) in Berlin. In a recent study, Christian and his team examined the post-COVID landscape in their core region, which includes Switzerland, Austria, and Germany. They found that each region had its own unique characteristics. Germany, being the largest country, was not surprising in terms of its size and activity in various sectors. However, Switzerland was a pleasant surprise, as despite its smaller size, it had managed to build a thriving ecosystem and was demonstrating significant growth in venture funding, new creation, and deep tech software. The findings were quite astonishing and revealed the diverse and dynamic nature of the region’s entrepreneurial and innovation landscape.
Switzerland’s Surprising Strength in the DACH Region: “I think this goes really back to Switzerland. I didn’t think that Switzerland would be Such a strong force in the DACH region compared to Germany.” — Christian Noske — Partner — NGP Capital (Berlin)
The Research Publication We Talk About
“And you have a lot of 2nd tier, 3rd tier cities even that attracted fund funding. The background of those cities is also as diverse as the cities. As I mentioned earlier, you have really everything from a robotic to a Fintech to That’s 3 and climate tech. If you’re very broad and diverse and put your, let’s say, coins on many horses, you’re maybe less impacted. So that That would be one explanation, to to to to that.” — Christian Noske — Partner — NGP Capital (Berlin)
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The Interviewer
This interview was conducted by Jörn “Joe” Menninger, startup scout, founder, and host of Startuprad.io. Reach out to him:
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Topics Discussed in this Episode:
startup podcast, Germany, Austria, Switzerland, founder, Startup.radio, Christian Noske, NGP Capital, Berlin, New York, global venture fund, Palo Alto, Shanghai, Helsinki, series A, series B, tech entrepreneurship, DACH area, research, COVID, venture funding, post-COVID, Q2, Switzerland, Austria, Germany, deep tech software, climate tech, robotics, fintech, per capita, university ecosystem, food and travel, decline, France, GSA, Deutschland, Österreich, Schweiz.
Automated Transcript
Jörn “Joe” Menninger [00:00:00]:
Hello, and welcome, everybody. This is Joe from Startup. Io, your startup podcast from Germany, Austria, and Switzerland, as well as the founder of Startup.radio, the world’s number one tech entrepreneurship radio. Today, I would like to welcome Christian here with me. Hey. How are you doing?
Christian Noske — Partner — NGP Capital (Berlin) [00:00:17]:
Hey, Joe. Thanks for having me.
Jörn “Joe” Menninger [00:00:18]:
Totally my pleasure. Can you introduce yourself to our audience here?
Christian Noske — Partner — NGP Capital (Berlin) [00:00:23]:
Yeah. Totally. I’m Christian based in Berlin. I’m with NGP Capital. Prior to coming back to my hometown, On Berlin, I also spent 10 years in New York, so kind of a global global citizen here. NGP Capital, is a global venture fund. We are obviously based in Berlin, But also based in Palo Alto, Shanghai, and Helsinki, so will they all over the world actively investing and leading series a and series b in b to b tech.
Jörn “Joe” Menninger [00:00:53]:
Mhmm. Mhmm. And that’s what we will be digging a little bit into because MGP P Capital has done some research on the DACH area for everybody who doesn’t know that, because we are in promotion with Cast Box, one of the world’s largest independent podcasting apps, and it’s going like crazy right now. We were we’re in this on the start page all across Europe. Thank you very much, Izzy, by the way, here. And, for everybody who doesn’t know DACH, It’s Germany, Austria and Switzerland, Deutschland, Ostrich, Schweiz, a little bit Liechtenstein, and a little bit tiny pieces of German speaking area around it that we cover. And, you felt the need to write some research here. Can you take us a little bit Through beef before I go through my questions?
Christian Noske — Partner — NGP Capital (Berlin) [00:01:46]:
Yeah. Totally, Joe. Maybe the background here why we did it is Because we can. We have a tool, that is called Qu. It’s an own development, another venture Fund called EQT as a mother brain, we have our Q, which is copied from James Bond, you know, as a nerd, there’s all the cool fancy toys. And so Q is our fancy toy analyzing data. And so we use that tool to look at what’s going on. As we got a lot of questions, how is it going? Is Venture funding up or down.
Christian Noske — Partner — NGP Capital (Berlin) [00:02:17]:
So we thought why not look at our core region here where we have an office and let’s try to answer this question from kind of post COVID to today, q two, namely. And the findings were quite interesting. We, as you said, Joe, we looked at Switzerland, Austria, and Germany, and each region, of course, is is quite different. Germany, maybe not surprising, is the largest one, also the largest country. But Switzerland was a big surprise for us. They are really punching over the wait line, for for the size of the country and and the ecosystem. It’s quite astonishing what they, what they have built. And The activity is going on both in venture funding, new creation, deep tech software, quite quite diverse.
Christian Noske — Partner — NGP Capital (Berlin) [00:03:04]:
So we looked at all this data and found obviously from, the quite quite hot year of 2021, 2022, a dip. So it was all about how how much, did venture funding reduce from 1 year to another, and and so that’s that’s all in the report here. And, Germany was really the one that was, maybe the most stable, if you wanna describe it this way, that’s the least decline, of those 3 countries. And The reason in our view at least is that maybe Germany is a bit more mature than Switzerland and Austria. But also if you look at the diversity, Both in regions, it’s not just Berlin, it’s also, Munich, Stuttgart, Cologne, it’s a lot of areas and the topics are also very diverse. So, obviously, everybody could see how certain technologies like Fintech took a big dip. And if Germany would be all Fintechs, then it would look very different. But Germany is all about, climate tech, all about robotics, all about topics that are maybe More hot this year than last year.
Christian Noske — Partner — NGP Capital (Berlin) [00:04:16]:
And for that reason, kind of balancing a bit the dip that we have seen in other Mhmm.
Jörn “Joe” Menninger [00:04:22]:
To put this in perspective for all the people who are new to our outlet here, we are talking around roughly 80, 85, 82,000,000 people living in Germany and somewhere Close to 9,000,000, something like 8 point something, 8 point a little bit population for Austria as well as Switzerland. But Austria almost has half of the GDP of Switzerland. Last data I have gotten is that we’re talking in Germany about 4,200,000,000,000 GDP, 810,000,000,000 for Switzerland and 480,000,000,000 always euros in Austria. That’s the data I have gotten. So it’s quite not surprising that Germany is by far the largest. Can you tell us some of the most surprising facts you found here?
Christian Noske — Partner — NGP Capital (Berlin) [00:05:20]:
Yeah. I think this goes really back to Switzerland. I didn’t I didn’t think that Switzerland would be Such a strong force in in the DAF region compared to Germany. As you said, Germany is much bigger, but if you look at per capita, Switzerland is 3 times the size of Germany. So 351, dollars tier per per copy diver is 113 or so dollars, in Germany. So it’s really much more similar in a way to Israel, which Israel is infamous for punching over the white line and being a small country, but being the world world capital of startups in itself. So that was a big surprise. And, as we also looked at some of the reasons, it was maybe not surprising that the university ecosystem of Switzerland had had a lot to do with that.
Christian Noske — Partner — NGP Capital (Berlin) [00:06:11]:
ETH is is obviously a global renowned name, but also of Lausanne. Those are all top universities, and I think the top 10 universities are still better than the best university in Austria. Also putting some, some also foundational maybe, talent pool in perspective here. So It was, that was a surprise. Maybe another surprise was around food and travel. Not an industry where we spend a lot of time, but the data showed that those industries had the biggest rebound. Maybe also not surprising given what we all had to endure during COVID that We wanted to get out. We wanted, like, our own restaurants.
Christian Noske — Partner — NGP Capital (Berlin) [00:06:53]:
We wanted to travel, and so that was also reflective here in in the data. Mhmm.
Jörn “Joe” Menninger [00:07:00]:
So, we we talking about Germany did fare better, but we have to admit it was also decline in terms of startup Funding. But it was not as big as, for example, France. Do you have any explanation why they would this was the case?
Christian Noske — Partner — NGP Capital (Berlin) [00:07:17]:
Yeah. It’s probably a lot of things, but France is a is a country that’s very focused on Paris and Attracts maybe a certain, startup and entrepreneur where Germany is all over the place. You have, of course, Berlin being the largest ecosystem, but Munich not, too far off there. And you have a lot of 2nd tier, 3rd tier cities even that attracted fund funding. And The background of those cities is also as diverse as the cities. As I was mentioning earlier, you have really everything from a robotic to a Fintech to That’s 3 and climate tech. If you’re very broad and diverse and put your, let’s say, coins on many horses and, you’re maybe less impacted. So that That would be one explanation, to to to to that.
Christian Noske — Partner — NGP Capital (Berlin) [00:08:04]:
And at least from what I’m hearing, and that’s just anecdotal, is, the language barrier is much less in Germany than maybe going to Paris or going to France. And so international investors, have it easier to invest also here in the DACH region versus maybe in France sometimes if they don’t have a local presence.
Jörn “Joe” Menninger [00:08:25]:
Mhmm. What we also try to highlight in our news is all those places most people even in Germany never have heard of, But they’re doing awesome stuff. They have a hot handful of awesome startups and, we always try to highlight this. So If you’re talking about Germany, you’re not only talking about Berlin, you’re not only talking about Munich. It’s not really scientifically valid. If you talk look at the, annual survey, the, German Startup Association does, They give you a rough estimate that 80% of the startup activity are outside of this hub. As I said, No. Not completely scientific.
Jörn “Joe” Menninger [00:09:09]:
It’s just a rough number to show you that there are 2 big hubs in Germany by now. Hopefully, there will be a few more, But it’s by far not the major activity as it is in other countries. Talking about major activities here, I’ve seemed you hinted in your research that AI startups are hot.
Christian Noske — Partner — NGP Capital (Berlin) [00:09:32]:
Yeah. It it was Probably the biggest spike in in all the data that we have shown there. Certainly a big peak in the first half of this year. Maybe not surprising. This goes kind of in this category why also, Germany had less of a dip. Germany has a long history, and is good positioned to be part of that AI race, whether that’s open source, which Really, a lot of the open source history, was was born in Germany. But also there were always a lot of applications developed around nation whether that’s robotic on the very industrial hardware savvy side or or on the software side, where where AI was was leveraged For for all kinds of things. We have, of course, famous unicorns, deep deep l and and others that show, where it also can be used.
