NGP Capital’s DACH Startups Decoded report analysed over 1949 funding rounds of 2049 venture-backed startups from across Germany, Switzerland, Austria, and Liechtenstein, to show the latest trends in startup fundraising, dealmaking, and industry activity from across the region.

After a period of stagnation, the startup funding market is showing signs of a significant upturn. Quarterly investments have hovered between $2.3 billion and $3.4 billion since late 2022, a range that initially seemed to be the "new normal" after the 2021 peak. However, recent data points to a structural shift, not just a temporary spike. This is evidenced by an 18% year-over-year surge to $3.3 billion in the second quarter of 2025 and a consistent 16% increase in the rolling 12-month data, which together suggest the market is now entering a new growth phase.

The research reveals the following key insights into startup investment trends in the DACH region:

Security & defence surges, enterprise software stalls.

In the last year, funding for security and defence tech skyrocketed by 312%, a $1.4 billion increase, which was fuelled by growing geopolitical tensions and Europe’s greater focus on national resilience. Conversely, enterprise software saw a decline, dropping by $330 million, or 19%. When we look at both defence and dual-use technologies, the total funding over the past 12 months increased by 175%, surpassing $1.7 billion. This increase was fuelled by several major funding rounds, including Helsing's $680 million Series D and $484 million Series C, as well as Quantum-Systems' $182 million Series C.

 AI shakedown

AI funding in the DACH region is moving away from core technology and toward specific applications. This is shown by the growth of Enterprise AI, which increased from 37% to 45% of total AI funding, and Industrial AI, which grew from 15% to 21%. Meanwhile, funding for horizontal AI (AI that can be applied across many different industries) has fallen to 21%.

Munich emerges as DACH’s Top VC hub as Swiss cities gain ground

Based on data from the last 12 months, Munich is the top startup hub in the DACH region, with its companies raising $3.44 billion. This success is largely thanks to the city's strong industrial and deep tech sectors. Switzerland also performed well, with five of its cities, including Zurich, Basel, Zug, Lausanne and Geneva, making the top 10.

DACH hardware startups outraise UK and France.

DACH region startups are outperforming the UK and France in venture capital funding for hardware. In the last year, DACH hardware startups raised $1.56 billion, surpassing the UK's $1.28 billion and more than doubling France's $0.70 billion. This indicates a renewed regional focus on hardware, even as software remains the dominant investment area overall.

Slower hiring after funding rounds.

Hiring at DACH startups has slowed down significantly, potentially due to the early adoption of generative AI. Data from startups that secured funding shows a clear trend. Seed-stage companies that raised capital in 2022 hired an average of 3.4 employees within seven months. This number dropped to just 2.3 for companies that raised in 2024, marking a 32% reduction. Series A startups saw a similar decline, with average hiring falling by 25%, from 11.5 new employees in 2022 to 8.6 in 2024. This slowdown suggests that startups are leveraging generative AI for productivity gains, which reduces the need to expand teams at the same pace as in previous years.

Local venture capitalists (VCs) are the driving force behind funding in the region overshadowing international investors

The most active investor in the region participated in 65 funding rounds over the past year. In contrast, international investors have a smaller, more selective presence. Even the most active global firm, with 19 rounds, would only rank around tenth when compared to the top local firms. However, the region’s biggest rounds are still dominated by foreign investors.

Top universities for startup founders

Graduates from a select group of universities are responsible for a significant share of startup funding success in the DACH region. Data from the last 12 months shows that Technical University of Munich (TUM) and ETH Zurich lead the pack, with their graduate’s raising capital in 181 and 132 funding rounds, respectively. Interestingly, the London School of Economics (63 rounds) is the only non-DACH university to make the top 10. Overall, six of the top 10 universities are German and three are Swiss, highlighting Switzerland's disproportionately strong influence in the startup ecosystem.

The research also reveals that over the past 12 months, German startups secured $8.47 billion in funding, accounting for nearly 70% of the region's total. This represents a significant 22% increase from the $6.96 billion raised the previous year, highlighting Germany's growing lead within the DACH ecosystem. Germany's growth is also reshaping the broader European VC landscape. The country is not only pulling ahead of France but is also steadily catching up to the UK.

Versus France:

The dynamic has shifted dramatically. While French startups raised 12% more than their German peers in 2023, the tables have turned. By 2024, Germany took the lead, leaving France 14% behind. This gap has widened further in 2025, with France now 32% behind Germany based on annualised data.

Versus the UK:

Germany is also making gains on Europe's top VC market. German funding has grown from 48% of the UK's total in 2023 to 51% as of mid-2025.

Christian Noske, Berlin-based Partner of NGP Capital, comments: The DACH startup ecosystem is entering a new era, defined by a sharpened strategic focus, significant technological depth, and growing geopolitical relevance. Although challenges persist – like scarce late-stage funding and persistent bureaucracy – the region finds itself at a critical inflection point. The stable funding environment over the past three years indicates a healthy, sustainable ecosystem that has found its footing and is now on the rise. The ecosystem could also become a major beneficiary of the EU-Inc initiative, provided the program can survive in its intended form to address some of the persistent bureaucracy.

“The real challenge now is to leverage this stability to create breakthrough innovations that can shape global markets. The DACH region's greatest strength has always been its knack for transforming complex problems into practical solutions. In a world facing increasing security concerns and the urgent need for sustainable industrial transformation, this capability is more valuable than ever. The startups emerging from this ecosystem have a genuine opportunity to solve global problems and build a better future.”

For more than a decade, NGP Capital has had a front row seat in witnessing the evolution of the DACH region’s ecosystem, having backed category creators such as GetYourGuide, Scandit, ANYbotics, The Exploration Company, EGYM, and many others. NGP Capital’s ‘DACH Startups Decoded’ report is based NGP Capital’s own data and analytics platform, Q, which scans and combines data from hundreds of different data sources. With $1.6Bn under management, NGP Capital is a global venture capital firm founded in 2005 investing in Europe and the U.S. that invests in early-stage companies from Series A onwards within enterprise software, industrial tech, cybersecurity, and infrastructure.

For more startup news, check out the other articles on the website, and subscribe to the magazine for free. Listen to The Cereal Entrepreneur podcast for more interviews with entrepreneurs and big-hitters in the startup ecosystem.