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Vorsprung durch Technik: Germany’s next industrial revolution
12/16/2025
Michael Lewis
Head of Research, ESG
Ian Bigelow
Senior Product Specialist
IN THE NUTSHELL
- As a gateway to Europe, Germany offers ideal conditions for the emergence of a “New Mittelstand” of companies whose technologies are increasingly vital to achieve Europe’s policy goals
- Innovation hubs across Germany have become technology epicenters, supported by policyinitiatives that are accelerating the growth of both the German and broader European growth-tech ecosystem
- Recent German policy initiatives aimed at unlocking capital to scale technologies critical to the success of Europe’s policy ambition are now creating attractive opportunities for investors
Introduction
Europe is at a critical inflection point, facing an urgent need to build and scale high-tech industries to meet policy goals and navigate through unprecedented geopolitical uncertainty. Germany is set to lead this new industrial revolution on the back of companies with proven technologies that need capital to scale production rapidly. To boost financing for critical technologies, European and German policymakers are mobilizing public and private capital to support scaleups aiming to become the next generation of industry leaders.
Transformation will rely on an already vibrant innovation and startup ecosystem that runs the length of Germany. Berlin is Germany’s flagship startup city, encompassing everything from software and fintech to cleantech and mobility and Munich’s Innovation Agenda 2030 sets an explicit goal to become one of Europe’s top hubs for AI and startups. These innovation hubs stand to benefit from recent efforts by policymakers to reduce capital markets regulation and improve the tax frameworks for venture capital (VC), all of which are designed to support startups and scaleups and expand the VC ecosystem in Germany and across the broader European Union (EU).
The efforts of policymakers have set the stage for the rise of Germany’s next generation of Mittelstand industrial champions while creating attractive opportunities for investors who want exposure to Europe’s most dynamic technology sectors. Germany’s science and research capabilities and its heritage of industrial innovation have led to the emergence of a class of young companies with “first-of-a-kind” technologies that have historically had insufficient access to capital but are now positioned to contribute to the build out of the European economy of the future.
In this report, we examine how critical technologies will play a pivotal role in delivering against many of Europe’s policy goals and Germany’s national priorities, the role innovation hubs across Germany can play in Europe’s transformation, and recent steps taken by policymakers to increase the availability of growth financing to scaleups may create attractive opportunities for investors.