The Top 5 German Startup Hubs Right Now

The German Startup Association recently released its latest report into the country’s business scene, revealing the cities with the most new startups per capita. There’s no prizes for guessing that Berlin has come out at number one, and it also won’t come as a total surprise to see that Munich is at the number two spot.

However, the remaining spots in the top five will be less familiar to those outside Germany’s tech ecosystem, and they highlight a growing democratisation of talent and funding beyond what were the go-to epicentres of innovation and industry. As the report points out, the share of new startups in the traditional hotspots of Berlin, Munich and Hamburg has dropped from 41% to 33% since 2019, with Hamburg not even cracking the top five and formerly less prominent regions like Saxony and Baden-Württemberg taking up more space in the startup scene.

A case in point is Heilbronn in Baden-Württemberg, which is the site of a hugely ambitious AI innovation park. Named IPAI, the park was the recent recipient of a reported $2 billion in funding from the Dieter Schwarz Foundation, founded by the eponymous billionaire founder of the Lidl retail empire.

The Schwarz-funded development is expected to become one of Europe’s most advanced AI development campuses, accommodating over 5,000 people across a 23-hectare site packed with labs and workspaces. Heilbronn already boasts the Bildungscampus of the Dieter Schwarz Foundation, which is home to institutions such as the Campus Founders startup incubator and branches of the Fraunhofer Society, the hugely influential applied sciences research organisation.

Heilbronn is a prime example of how forward-thinking entrepreneurs can radically alter the startup ecosystem of a target location. While it’s not yet among Germany’s most prominent startup hotspots as measured per capita, other similarly ‘unsung’ cities (ie, cities not named Berlin and Munich) occupy very high rankings. So let’s run through the top five as revealed by the GSA report.

Just an hour’s train ride from Heilbronn is another of Baden-Württemberg’s startup hubs: the historic and picturesque city of Heidelberg. It’s noted for its centres of learning, including Germany’s oldest university, the Max Planck Institute for Medical Research, and the Max Planck Institute for Astronomy.

Unsurprisingly, many startups in the region have been spinouts from these organisations. A recent addition to the ranks is sci-an, an AI analytics company which benefited from the Max Planck Incubation program at the Institute for Astronomy.

The company creates AI solutions to allow events organisers to better collect and analyse the preferences of attendees and customers, processing both voice and text feedback. It’s a prime example of cutting-edge AI research being carried out in Baden-Württemberg and we wouldn’t be surprised to see the firm migrate over to the neighbouring IPAI campus in the near future.

It’s easy to see why Karlsruhe, which is also located in Baden-Württemberg, has ranked so highly on the latest GSA list. It’s home to the Karlsruhe Institute of Technology, as well as almost 5,000 IT companies and no fewer than 12 startup incubators. And here’s a fun fact: a research fellow at the University of Karlsruhe became the very first person in Germany to receive an email, way back in 1984.

One local success story is AskUI, a user interface automation startup which last year raised €4.3 million in seed funding. Its platform utilises AI to remove the extensive manual work often required for automation workflows, and has been hailed by PE firm Eurazeo as “a cornerstone solution” in this space.

Third place on the list takes us to the state of Hesse, where Darmstadt is an officially designated “city of science”. This reflects the wealth of scientific institutions in the area, including the European Space Operations Centre, the GSI Centre for Heavy Ion Research (where the synthetic chemical element darmstadtium was created), and ATHENE, which is Europe’s largest research centre for IT security.

The presence of the latter institution is particularly significant, given that cybersecurity is one of the booming verticals within tech right now. Yet another hotbed of research here is TU Darmstadt, or the Technical University of Darmstadt, which has yielded spinouts including Revoltech, an impact startup which has created a hemp-derived leather-substitute called LOVR.

Revoltech’s ambition to ‘fuse nature, technology and science’ to create a ‘sustainable revolution in the textile industry’ has earnt interest from investors, with the firm enjoying a seven-figure seed round in 2022.

It was perhaps inevitable that Bavaria’s wealthy and exhilarating capital would take the runner-up spot. Home to the headquarters of companies like Siemens and Microsoft Germany, Munich is also the base of the Fraunhofer Society, whose annual research budget of €3.0 billion allows a 30,000-strong army of scientists and engineers to carry on trailblazing work.

Just one of Munich’s many innovative startups making headlines is Orbem, a spinout from the Technical University of Munich, which is deploying AI-powered MRI technology to scan and classify poultry eggs in a non-invasive way.

This can detect egg fertilisation and the sex of developing embryos, and promises to be a game-changing instrument for making the faming industry more efficient and prevent the mass culling of unwanted male chicks. The ingenuity of the technology led to the company closing €30 million in Series A funding last year.

It’s a city that needs no introduction, though perhaps another fun fact is in order: Berlin was where the very first programmable, fully automatic digital computer, the Z3, was completed in 1941 (and later destroyed in the war). Today, the city boasts world-renowned research centres such as the Technical University of Berlin (the first German “TU” institution) and the sprawling WISTA Science and Technology Park.

Unsurprisingly, Berlin is home to several prominent VC firms and angel investors,  including those making up SB21. A coalition of successful entrepreneurs who are ploughing some of their hard-won profits back into the tech ecosystem, SB21 is emblematic of the agile and forward-thinking Berlin scene.

So is one of Berlin’s hottest new startups, HealthCaters. The female-founded healthtech company tackles disease prevention through self-screening stations and an AI-powered coaching app, whose virtual assistant helps patients test 27 medical metrics, such as blood pressure and metabolic health.

The likes of IBM and WeWork have already made the tech available to their workers, and the startup secured just over €1 million in seed funding last year.

Whether your company is based in Germany or you’re looking to make steps in the DACH region, our Frankfurt-based managing partner Dr Jan Eiben can provide insights and advice for your next moves. Say hello.