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Germany’s proptech sector is growing at an impressive rate, with the number of active start-ups surging to 1,264 in 2024—a 41% year-on-year increase—according to the latest Blackprint market report. However, while new companies continue to emerge, the funding environment is shifting, posing new challenges for firms looking to scale.
The total volume of venture capital flowing into German proptechs fell by 9% to €1.018 billion in 2024, marking the first recorded decline in sector investment. While this may indicate investor caution, the number of financing rounds actually rose by 73%, suggesting that while individual deals may be smaller, there is still strong interest in the space. Early-stage investment is holding up well, with pre-seed and seed rounds accounting for almost half of all transactions. However, later-stage investment—Series A through C—has stagnated or declined, reflecting broader market concerns over profitability and scaling challenges.
The report highlights how venture capital firms are becoming more selective, focusing on business models that show clearer paths to revenue generation. This has resulted in a significant shift in how proptechs are raising capital. The report notes that for the first time, debt funding has taken on a major role in financing proptech companies, particularly in the asset-heavy energy efficiency sector.
Energy efficiency start-ups dominate the sector
Energy efficiency has emerged as the dominant focus within the German proptech sector due to several factors. High energy prices have driven businesses and property owners to seek cost-saving solutions, while stringent government regulations around carbon reduction have made energy-efficient technologies a necessity rather than a luxury. Additionally, advancements in renewable energy systems, smart metering, and AI-driven building management have created scalable business models that attract investment.
These factors, combined with increasing consumer and corporate demand for sustainable solutions, have positioned energy efficiency at the forefront of the proptech landscape. The Blackprint report highlights that 81% of all proptech funding in 2024 was directed at energy efficiency companies, emphasising the strategic importance of this segment.
Companies such as Enpal, Zolar, and Sunvigo have attracted particularly large amounts of capital. Enpal, for example, secured €1.6 billion in debt financing alone, reflecting investor confidence in the sector’s long-term profitability and necessity. Beyond regulatory requirements, high energy prices and the increasing pressure to comply with ESG standards are key factors driving capital allocation in this area.
Debt financing gains traction
Debt funding is now a crucial financing tool for proptech firms across various stages, not just for large, established companies. While major players like Enpal have secured billion-euro financings, smaller start-ups are also turning to debt funding as an alternative to venture capital. Many early-stage firms focused on energy efficiency are increasingly reliant on credit lines and mezzanine capital to finance their asset-heavy business models, particularly in solar, heating, and building retrofitting technologies. The trend suggests that while venture capital is still available, investors prefer funding technology-driven innovations rather than asset-intensive operations. A total of €2.715 billion was raised through debt financing across just six rounds, a substantial figure that far outweighs venture capital investment in the sector.
This development signals a maturing market, where investors see proptech as an infrastructure-heavy sector requiring stable, long-term financing rather than the high-risk, high-reward profile that traditionally attracts venture capital. This shift could indicate that traditional VCs are less willing to commit large amounts of capital to later-stage proptechs, preferring instead to focus on early-stage innovation.
Geographical trends: Proptech beyond the Big Three
Germany’s largest cities remain at the centre of the proptech ecosystem. Berlin, Munich, and Hamburg continue to dominate, providing fertile ground for start-ups due to strong access to financing, talent, and corporate partnerships. However, growth outside these hubs is also accelerating. The Rhine-Main and Rhine-Ruhr regions are seeing an increasing number of proptech firms, capitalising on their proximity to major corporate real estate players.
Meanwhile, eastern German cities such as Leipzig, Chemnitz, and Halle are seeing a decline in start-up formation, suggesting that while proptech remains a dynamic industry, geographical disparities persist in terms of funding availability and ecosystem strength.
The Blackprint report makes it clear that proptech is at a critical juncture. While the sector continues to expand, investment dynamics are shifting significantly. Venture capitalists remain interested but are becoming more selective, and later-stage funding is becoming harder to secure. The rise of debt financing suggests that larger, asset-heavy companies are adapting to new capital structures, while energy efficiency remains the dominant area of innovation and investment.
This all puts more pressure on proptechs to demonstrate profitability sooner, adapt to regulatory pressures, and navigate an increasingly complex funding landscape. Investors will be watching closely to see how start-ups balance innovation with financial sustainability in an shifting real estate market.