Germany’s startup sector is experiencing a boom, with artificial intelligence helping drive a record number of new companies despite a wider industrial downturn.
More than 3,000 startups were founded in Germany in the first half of 2026, according to economy ministry data, a 52% increase on the previous six months and the highest figure on record.
Around a third of the new companies are focused on AI, with growing access to capital and advances in the technology helping to fuel the rise. A weaker labour market is also pushing talent away from traditional corporate jobs and towards entrepreneurship.
Germany has lost around 400,000 industrial jobs between 2019 and 2025 as domestic manufacturers have faced increasing competition from China, according to the German Economic Institute. Companies including Volkswagen, Mercedes and Thyssenkrupp have been hit by the wider industrial downturn.
The pressure on established businesses is creating opportunities for startups developing technology designed to cut costs and automate work. Berlin-based Langdock, which develops software to help companies adopt AI, has grown to around 60 employees and €50m in revenue since being founded three years ago.
Hendrik Hofstadt, Chief Technology Officer at Langdock said: “We have a lot of legacy industry that does now have to reinvent itself. It’s actually a pretty great market for new players to get into, because there’s a real openness towards new solutions.”
The growth is not limited to AI and software. Software accounts for 28% of newly founded startups, while healthcare makes up 9% and food 6%, with companies developing products across areas including healthcare and fashion.
Menstruflow, founded by Polina Sergeeva in 2023, has developed a device using transcutaneous electrical nerve stimulation to help reduce menstrual pain. The company’s sales increased 300% year-on-year during the first quarter, with Sergeeva now targeting medical certification and expansion into retail.
Funding is also becoming more available. German startups raised €8bn in venture capital between January and September, more than during the whole of 2025, according to the German Startup Association’s Startup Monitor.
The increase in funding and startup activity comes as the German government looks to make the country more attractive to entrepreneurs. Chancellor Friedrich Merz’s government adopted a Startup and Scaleup Strategy in July containing 152 measures aimed at reducing bureaucracy and attracting more private capital.
Despite the momentum, Germany continues to lag the US when it comes to AI funding. German AI startups raised €5.7bn between January and September, compared with nearly €308bn in the US, according to the Startup Monitor.
Timo Wollmershaeuser, head of forecasts at the Ifo Institute for Economic Research said: “If these companies quickly move elsewhere looking for funding, then the ideas we develop here end up creating value somewhere else.”
