Over 38% of startups in Germany already have external funding. Around 24% intend to seek investor financing in the future to accelerate growth. However, finding investors is often a challenge for German founders.

In this article, we detail the financing options available to startups in Germany, including how you can choose the option that’s right for you. We also examine the channels used to identify investors and explain how to prepare and present a professional pitch.

What’s in this article?

• What financing options are available for German startups?
  
• How to choose financing for your startup
  
• How to find investors
  
• How to prepare pitches to investors
  
• How to appear professional during pitches
  

What financing options are available for German startups?

According to data from the German Startup Monitor, three-quarters of startups surveyed in 2024 intended to seek financing within the next twelve months. Given how much capital new businesses need, knowing the different startup financing options is important. Below, we explain the key ways you can acquire capital:

Equity capital

Founders can finance their startups using their own assets—a process known as “bootstrapping.” However, this option requires you to have enough personal savings or the ability to borrow money from friends and family. Alternatively, you can go into business with a partner or partners who will bring their labor and expertise to your new venture.

Investor capital

If you don’t have enough personal financial resources, another option is to finance your new business through investor capital. Finding investors for a startup requires a convincing business idea and a solid business plan. Potential funders are looking for ideas with growth potential, clear business models, and engaged founder teams.

One way of finding investors is to participate in pitch events or startup competitions. Specialized online platforms and networks also provide opportunities to directly locate external capital. In addition, the success or failure of your investor search can depend on the stage of your company. For example, angel investors frequently invest early, bringing their capital, know-how, and contacts with them. On the other hand, venture capital (VC) firms focus on businesses with strong growth and offer larger amounts of financing accordingly.

Advance financing

Specialist service providers offer companies a third financing option: advance financing. This is a fast way of acquiring capital based on a company’s current sales figures and its anticipated revenue. For example, Stripe Capital offers financing that ties repayments to earnings. The less you earn, the less you pay back. With Capital, entrepreneurs can get loans or merchant cash advances in minutes. They can do so without the lengthy application processes loans usually entail.

Bank loans

Some founders look to banks for the capital they need to set up their businesses. Securing a bank loan requires good credit and a convincing business plan. The bank will then check whether the applicant has good credit and evaluate the potential of their business idea.

Public subsidies

In Germany, loans are available from banks and public funding bodies. For example, founders can apply for promotional loans from the Credit Institute for Reconstruction (KfW) or state-level investment banks. These institutions offer special subsidy programs and low-interest loans aimed specifically at helping founders and young companies with their financing.

Crowdfunding

Crowdfunding can help private investors raise capital from individual supporters via specialized platforms. To do this, founders must present and market their ideas online. If they reach their defined funding target, they receive the amount accumulated, usually minus a platform fee.

How to choose financing for your startup

Choosing the right financing starts with assessing your startup’s status. Every startup has different needs. Many financing options could be suitable based on your startup’s current stage, amount of needed capital, and strategic goals.

The financing you choose should depend on your financial requirements. However, you should also consider other factors such as repayment flexibility, distribution of stakes in the business, and third-party support. Here are some key steps to help you make your decision:

Clarify wants and needs

The first step in choosing financing is to define how much capital you need. Founders should ask the following questions:

• What short-, medium-, and long-term goals will the company pursue with this financing?
  
• What individual cost factors require capital?
  
• How much total capital do we need?
  
• How fast do we need the capital?
  
• How flexible should repayments be?
  
• Will we give away stakes in the company in return for investment?
  
• What resources are available for complex application processes?
  

The answers to these questions can help you identify appropriate sources of financing for your business. Having a clear plan can also make it easier to communicate with potential investors.

Perform research and select options

Once you’ve clearly defined your basic goals and how much financing your company needs, research potential financing options. It’s important to focus on whether each type of financing is suitable for your business and objectives. For example, state-level investment banks only grant promotional loans to businesses that fulfill certain prerequisites.

Compare your selected options, and choose the source of financing that best suits your business. Consider consulting with other entrepreneurs who have set up or manage their own businesses. Real-world testimonies often offer valuable perspectives and can help you make the right decisions. Tax advisors and other finance experts can also provide helpful advice.

Often, bundling multiple financing options can be beneficial. For example, a startup might begin with advance financing to secure basic needs and add equity from angel investors later to finance further growth. A diversified financing strategy can help reduce risks and give you the necessary flexibility to achieve different business goals.

Contact potential investors

Once you’ve identified suitable financing options, reach out to each potential investor. Depending on the source of financing, this could involve calling your principal bank, setting up meetings with potential investors, or registering with a crowdfunding platform.

How to find investors

Here are some ways startups in Germany can contact potential investors:

• Events and conferences: Founders can meet potential investors at trade shows, founder conferences, and other events. Some investors make decisions based on personal impressions. Therefore, face-to-face interactions are fundamental to building trust.

• Competitions and pitch events: Founder competitions can help boost a startup’s profile. Startup founders present their ideas to inspire potential investors.

• Private networks: Founders can seek investments from their friends, family, and others in their networks. This can help increase the chances of finding potential funders. A founder’s network can also help provide recommendations, meetings, and contacts.

How to prepare pitches to investors

It is important to find potential investors, but you must also convince them to invest. To do so, founders can pitch their ideas—give investors a brief presentation followed by a discussion or Q&A. A well-prepared pitch gives you a better chance at a positive response. Below, we provide the steps to prepare a pitch to potential investors:

Create a business plan

Your business plan is the foundation of your pitch. It contains key information about your business, including your strategy, financial requirements, and competition. You can send this plan to potential investors ahead of time.

During the pitch, you should limit your presentation to the essentials. However, you should have a thorough understanding of your business plan so you can answer questions with confidence.

Prepare your pitch

The pitch is a trimmed-down version of your business plan that is compact and visually appealing. The goal is to make your idea and prospects as convincing as possible for investors. A well-structured pitch conveys the necessary information without overwhelming listeners with details. Keep content to a minimum, and avoid unnecessary visuals.

Once you’ve designed your pitch, you should practice it. Ideally, you should do so in front of an audience of trusted individuals. This can help you get feedback and refine your pitch.

Prepare FAQs

Following your pitch, investors will ask questions about your company and planned financing. You can prepare for this by predicting potential questions and answering them ahead of time. You can also put together an FAQ document with probable and less likely questions. This will help you prepare for almost any question and appear professional during the Q&A.

How to appear professional during pitches

Being professional is important when finding investors and convincing them of your business idea. Often, an investor’s decision is based on facts and figures as well as personal impressions. Here are some pointers to help you be professional during your pitch:

Appearance

Make sure your outfit is clean, in good condition, and appropriate for the occasion. The ideal choice is business casual attire because it gives an impression of professionalism without being overly formal or informal. Make sure your clothing highlights your competence rather than acting as a distraction. Present an authentic image of yourself that reflects your personality and company’s identity.

Speech and body language

The way you speak is just as important as what you say. Speaking clearly and calmly can help you build trust and give a convincing presentation. Investors look for a founder team that is confident and competent. Therefore, your body language should exude confidence by maintaining eye contact, gesturing with purpose, and using open body language.

Storytelling

Your pitch should both present facts and figures and tell a story. For example, explain to your investors the problem your company solves, the added value it offers, and its growth potential over the next few years. This can help your audience see your startup’s potential and will appeal to their emotions. Well-structured stories are memorable and can help convince investors to invest.

Interaction

A pitch involves presenting your ideas and actively listening and responding to questions. Take concerns seriously, and show that you are willing to cooperate. Good interaction builds trust and allows you to learn more about the interests and expectations of your potential investors. Often, the success or failure of your pitch can hinge on how you react to criticism.