Bildnachweis: EY-Parthenon.
Germany’s biotech sector combines scientific depth, experienced talent, and strong regional clusters. Yet many companies still struggle to convert research into late-stage development, market access, and scale. The issue is less a shortage of ideas than a shortage of coordinated capital, faster translation pathways, and practical financing models beyond classic venture capital.
Germany remains one of Europe’s strongest biotech research locations, but its scale-up performance does not yet match its scientific base. Strong universities, patent output and regional clusters contrast with deeper capital and commercialisation pathways in the US, the UK, Switzerland and the Netherlands. The growth trap appears when start-ups and research companies move from early validation to proof-of-concept, manufacturing scale-up and market entry.
The Financing Bottleneck
The pressure became clearer in 2025. German biotech capital raised fell from EUR 1.9 billion to EUR 1.8 billion, while venture capital declined from EUR 898 million to EUR 601 million. The three largest rounds accounted for 71% of venture capital funding, and series B financing dropped to EUR 7 million. Germany recorded no biotech IPO, compared with four across Europe and twelve in the US. The domestic route from series B to public markets therefore remains weak.
Why the gap persists
The main issue is structural. Public support and seed financing are comparatively strong, but growth-stage capital remains scarce. German households hold substantial financial assets. Pension funds, insurers, and other long-term pools play only a limited role in biotech venture capital. International syndicates remain essential, but they tend to back companies with clear clinical inflection points, experienced management, and globally competitive data packages. Many scientifically strong companies are therefore undercapitalised before value has been created.
Translation before scale
Germany invests heavily in research without converting enough of it into companies, assets, and investable programmes. A large share of third-party funding still flows into basic research, while commercial incentives for academic founders remain uneven. Compared with Switzerland, the UK Golden Triangle, or the Netherlands, German clusters are less integrated across academia, hospitals, investors, and industry. Fragmentation slows decision-making and weakens visibility for investors.
Regulation as capital cost
Regulatory complexity has a direct financing impact. Slow approval timelines, fragmented data protection oversight, and complex contracting extend development plans and increase cash burn. Germany’s robust standards create trust, but become a disadvantage when processes are slower than in competing countries. Every delayed study start, data access decision, or manufacturing approval increases the capital required before the next milestone.
A broader funding stack
German biotech companies should move from episodic fundraising to a deliberate financing architecture. Equity remains central, but it should be combined with public co-investment, European Investment Bank, and European Innovation Council instruments, translational grants, the ‘Forschungszulage’, milestone-based collaborations, venture debt, royalty structures, and, where suitable, IP-backed financing. Each source of capital should be matched with the risk profile of the next milestone.
What executives can do
Management teams should build a 36-month financing map that links scientific milestones to specific capital sources. The plan should show which activities can be funded non-dilutively, which require venture capital, which could be advanced through an alliance, and which should be deferred until stronger data are available. Companies should approach US, UK, and Swiss investors before series B, not only when domestic options narrow. International syndication can improve follow-on capacity and increase optionality for a future listing or sale.
Commercial proof earlier
Commercialisation planning should begin before late clinical development. Investors increasingly expect evidence of market size, reimbursement logic, manufacturing feasibility, and competitive differentiation. For advanced modalities, this requires early work on cost of goods and launch sequencing. For platform companies, it requires a clear path from technology promise to priority assets. Capital follows programmes that can show a route to patients, payers and partners.
Partnerships with structure
Partnerships are becoming financing instruments as much as strategic options. Milestone-based R&D collaborations, option-to-license agreements and co-development models can fund progress while preserving future upside. They work best when objectives, governance, intellectual property, data rights, and termination terms are settled early. Partnerships should therefore be designed as part of the capital plan, not only as a fallback after funding rounds fail.
Asset-light, not Asset-thin
Capital efficiency also requires a careful operating model. Contract development and manufacturing organisations, specialist service providers, and shared laboratories allow start-ups to delay heavy infrastructure investment. However, asset-light does not mean outsourcing strategic control. Capabilities linked to proprietary process know-how, quality-critical steps, data advantage, or supply reliability may need to be internalised earlier. The right model is often hybrid.
AI as a practical lever
Artificial intelligence should be assessed as a productivity tool, not as a branding exercise. Strong near-term applications include target identification, molecular design, hit screening, patient stratification, trial design, and operational analytics. Used well, AI can reduce cycle times and improve decision quality; used poorly, it adds cost without validation. German biotech companies should focus on use cases with measurable effects on timelines, probability of success or cash burn.
Investor priorities
Investors have a clear opportunity in the series B and series C gap. The most attractive targets combine differentiated biology, credible translational evidence, experienced leadership, and realistic capital plans. German family offices, corporate investors, and institutional investors can improve risk-adjusted exposure by co-investing with specialist international funds rather than building isolated positions. This would bring domestic capital closer to global diligence standards while retaining more value creation in Germany.
What should change now
Three shifts would have the greatest near-term effect. First, companies should professionalise capital planning as early as programme planning. Second, investors should build dedicated growth vehicles for clinical-stage German biotech rather than waiting for public markets to reopen. Third, clusters should coordinate investor access, clinical trial capabilities and translational infrastructure more visibly. Germany does not need to copy the US model, but it does need more concentrated execution.
A realistic route out
Germany’s growth trap is not a scientific problem – it is an architectural one. It is constrained by the distance between discovery and investable, scalable businesses. That distance can be shortened through better capital architecture, earlier commercial proof, cross-border syndication, structured partnerships, and selective use of AI. Companies and investors that act on these levers can help turn Germany from a strong research base into a more competitive scale-up ecosystem. Framework conditions are shifting quickly; the responsibility now sits with industry leaders to move faster than policy.
About the author:
Klaus Ort is a senior partner of EY-Parthenon with over 35 years of experience in consulting, M&A, technology, and restructuring. He advises life sciences and healthcare companies on transformation and sustainable value creation.
