EY study shows Berlin and Baden‑Württemberg overtake Bavaria in startup funding, while early‑stage firms still face challenges
Executive summary: EY’s July 2026 study reports that Berlin and Baden‑Württemberg have attracted the largest share of German venture‑capital funding, surpassing Bavaria, while highlighting persistent challenges for early‑stage companies. The redistribution of capital alters regional competitiveness, influencing talent flows, real‑estate costs and prompting state governments to reassess their startup incentive programs.
Who is involved: EY (Ernst & Young), German venture‑capital investors, startup founders, and the state governments of Berlin, Baden‑Württemberg and Bavaria.
Likely next: From September 2026 the removal of the secondary‑income ceiling for Lohnsteuerhilfe associations will broaden access to tax advice; Berlin and Baden‑Württemberg may continue to attract VC inflows, while Bavaria could review its incentive schemes to retain founders.
An EY study released on July 22 2026 reveals that billions of euros have flowed into German start‑ups, with Berlin and Baden‑Württemberg displacing Bavaria as the top two destinations for venture capital. Despite the funding surge, the study notes that young companies continue to confront obstacles such as talent shortages, regulatory complexity and high operating costs. The shift highlights a changing regional landscape for Germany’s entrepreneurial ecosystem.
Timeline
- — EY-Studie: Milliarden für Start-ups: Berlin und BaWü verdrängen Bayern (Handelsblatt)
Analysis — what this means
Likely next events
- From September 2026 the income threshold for eligibility to tax‑advice associations (Lohnsteuerhilfe) will be removed, expanding access to tax advice for more individuals.
Sectors affected
- venture capital
- German startup ecosystem
- Munich residential real estate
- tax advisory services
Regulatory implications
- Removal of the secondary‑income ceiling for Lohnsteuerhilfe associations effective September 2026 expands eligibility for tax advice.
Historical parallels
- 2021: Berlin’s venture‑capital volume surpassed Bavaria’s for the first time, marking a shift in regional startup funding.
- 2020: Munich rent‑cap protests sparked a national debate on housing affordability and led to temporary rent‑control measures.