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Venture Capital funding for AI Start-ups

Venture Capital Funding for AI Startups: Challenges & Opportunities in Germany and the US

Funding is one of the most crucial factors in enabling AI-driven startups to realize their business ideas. In contrast with the U.S. and China, however, the German venture capital market is still developing, making it more difficult for German AI startups to secure funding.

The second Transatlantic AI eXchange event on June 22, 2021, covered challenges and opportunities around VC funding for AI startups in the US and Germany. Renowned experts from key players in the VC industry (i.e. Robert Bosch Venture Capital, M12, B Capital) as well as successful entrepreneurs joined the webinar session to shed light on this topic.

Yvonne Lutsch, Investment Principal from Robert Bosch Venture Capital (RBVC), disclosed that RBVC has $700 million in its active portfolio divided among about 50 investments and is currently raising another fund with a target size of about $300 million. When it comes to investing in startups, Lutsch suggested that German entrepreneurs be more bullish and “think big” as founders in the U.S. do.

Samir Kumar, GM and Managing Director from M12, explained that the core of M12 is enterprise SAAS and close to half of its portfolio companies have a strong AI component. He also pointed out that M12 is looking to do more deals in Germany with a particular focus on AI driven companies. In terms of investment criteria, Kumar emphasized that the team is crucial and that the best founders demonstrate a level of self-awareness where they can complement their team.

Rashmi Gopinath, General Partner at B Capital, highlighted that AI has been one of the underpinnings of B Capital’s enterprise investment. Gopinath emphasized that growth margins are very important criteria when evaluating a potential investment.

Mark Maloney, Consul at the U.S. Consulate General in Hamburg, shared that the U.S. State Department is paying a lot of attention to the AI market and that currently, German AI companies are undervalued compared to American AI companies. These dynamics illustrate that there is opportunity in the AI field in Europe and particularly in Germany.

Cyriac Roeding, CEO & Co-Founder of Earli, Inc., is convinced that exclusive access to data is only a short-term advantage and not the future of AI. According to Roeding, the right way to build an AI driven company is to create a concept that generates more and more data with an increasing number of users. Finally, building a complementary team is of major importance to ensuring the success of the company.

Ragnar Kruse, the co-founder of AI.HAMBURG and AI.FUND, complemented the prior perspectives by emphasizing the importance of German AI startups going international to achieve a reasonable growth rate.

German AI startups should put these suggestions into practice to increase their chances of securing sufficient funding for their business operations. The discussion made clear that there are great chances for German AI startups to obtain funding and become global players when they keep key factors in mind.

View the entire event here: Transatlantic AI eXchange Event Video Archive. This event is part of the Transatlantic AI eXchange webinar series, a partnership of GABA and AI.HAMBURG.

By Oliver Gottfried

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