Why Germany's deep-tech founders cluster around Munich, Aachen and Dresden
Three cities produce a striking share of Germany's hardware start-ups. The reasons are older and more specific than talent alone, and the failures of Lilium and Volocopter show the limits.
Ask where German start-ups come from and most people answer Berlin. For software and consumer platforms, that is broadly right. For hardware, the map looks different. The young companies building photonic chips, quantum computers, satellites, battery recycling plants and industrial robots tend to sit near a small number of technical universities: Munich, Aachen and Dresden above all, with Karlsruhe, Stuttgart and a few smaller cities behind them. This is not an accident of property prices or lifestyle. It reflects decades of institution building, and it has consequences for anyone trying to invest in or partner with German deep tech.
Munich: a university that built its own start-up machine
The Technical University of Munich did something few European universities attempted early. In 2002 the entrepreneur Susanne Klatten founded UnternehmerTUM, a non-profit centre for innovation and business creation attached to TUM in Garching. It runs training programmes, an incubator, a 2,700 square metre MakerSpace where start-ups can build prototypes and small series, and since 2011 its own venture capital firm, UVC Partners. In 2024 UnternehmerTUM topped the FT-Statista ranking of Europe's leading start-up hubs, according to Sifted, which reported that the centre creates about 50 new businesses a year and that UVC manages around 400 million euros.
A fact few outsiders know: TUM itself reported a record 115 start-ups founded by its researchers, students and alumni in 2025, and the highest number of EXIST start-up grants of any German university that year, 32. EXIST is the federal programme that pays researchers a salary while they turn work into a company. The output shows up across deep tech. OroraTech, the wildfire satellite operator, grew out of the WARR student group that built the MOVE-II CubeSat. The founders of modular robot maker RobCo were research associates at TUM's chair of robotics and AI. Battery analytics firm TWAICE, founded in 2018 by two TUM doctoral researchers, used the incubator, the accelerator and UVC from the start.
Munich also has what the other clusters lack in such density: large industrial customers and capital. Companies such as BMW and Siemens provide pilot customers, procurement and experienced engineers. That combination explains why the city now hosts several of Germany's best-funded hardware companies, including Isar Aerospace and ARX Robotics.
Aachen: engineers by volume
RWTH Aachen University is less famous internationally than TUM but may be the most productive source of technical founders in the country. A study cited by Aachen's FutureLab found that RWTH produces the highest share of start-up founders of any German university, at 5.3 per cent, and that it generated 75 spin-offs in 2020 alone. The city's advantage is its engineering depth in production technology, materials and electrical engineering,, with Campus Melaten often cited as the best local example of institutes and companies working side by side.
Two of the most ambitious hardware bets in Germany come from there. Black Semiconductor, founded in 2020 by brothers Daniel and Sebastian Schall, is building a 300 mm graphene photonics pilot line in Aachen. cylib, founded in 2022, commercialises a water-based battery recycling process developed at RWTH. Both also show a second Aachen trait: proximity to the industrial Rhineland and to North Rhine-Westphalia's state funding. cylib's 26.1 million euro EU grant came from Just Transition money intended to help the lignite region diversify.
Dresden: a semiconductor ecosystem that survived its own crisis
Dresden's deep-tech cluster is built on chips. The Silicon Saxony association, founded in 2000 and now with more than 700 members, describes the region as Europe's largest microelectronics cluster. Fabs, equipment suppliers, research institutes and TU Dresden sit within a few kilometres of each other, and that matters enormously for chip start-ups, which need process engineers and access to tools that cannot be rented in a co-working space.
The story behind one Dresden company is a lesson in how clusters retain knowledge. In 2007 a researcher at Qimonda, then a Dresden memory manufacturer, discovered that silicon-doped hafnium oxide can be ferroelectric. Qimonda went insolvent in 2009, but the research continued at NaMLab, an institute linked to TU Dresden, and became the Ferroelectric Memory Company, which announced about 100 million euros of funding in November 2025. The people and the knowledge stayed in the city even after the company that employed them disappeared.
Dresden's newer chip start-ups follow the same logic. SEMRON is developing 3D-stacked capacitive AI chips; SpiNNcloud Systems, a spin-off from Christian Mayr's group at TU Dresden, commercialises the SpiNNaker2 brain-inspired computing architecture developed with the University of Manchester in the EU's Human Brain Project. Robot software firm Wandelbots came out of TU Dresden's computer science faculty in 2017.
The second layer: the outsiders that prove the rule
Not every strong deep-tech company sits in the big three. INERATEC came out of the Karlsruhe Institute of Technology, a Helmholtz centre with deep chemical engineering roots; KIT even took an equity stake. eleQtron was spun out of the University of Siegen, where physics professor Christof Wunderlich had built a quantum computer before the company existed. Sereact credits the University of Stuttgart's technology transfer with its start. And Q.ANT came not from a university at all but from inside TRUMPF, the family-owned laser group. What these have in common with Munich, Aachen and Dresden is not geography but a research institution or industrial parent with decades of specialist know-how in one field.
SPRIND and the federal layer
Above the local level, Berlin has added new instruments. SPRIND, the Federal Agency for Breakthrough Innovation, was founded in December 2019 and is based in Leipzig. For its first years it operated under rules designed for ordinary ministries, and its director Rafael Laguna de la Vera argued that contracts and approvals across several ministries made its tools too slow. In November 2023 the Bundestag passed the SPRIND Freedom Act, giving the agency a legal basis and more flexible budget management. Less widely known: SPRIND runs open challenges, such as its 2023 New Computing Concepts challenge, that act as a scouting funnel; SEMRON took part and SPRIND later contributed to its seed round.
Equally important but less visible is the role of public banks and EU programmes. High-Tech Gründerfonds, the federal seed fund, backed INERATEC in 2018 and Reflex Aerospace in its Series A. State banks such as L-Bank in Baden-Württemberg and NRW.BANK invest alongside venture funds. For semiconductor manufacturing the numbers dwarf private capital: of Black Semiconductor's 254.4 million euro package, 228.7 million came from federal and state funds under the EU's IPCEI scheme.
The cautionary tales: Lilium and Volocopter
Clusters do not guarantee outcomes, and the two best-known German hardware start-ups of the last decade both went through insolvency.
Lilium was founded in 2015 by four TUM engineers and doctoral students and became one of TUM's best-known start-ups. It listed on Nasdaq through a merger with a special purpose acquisition company in September 2021. In October 2024, after failing to reach agreement on a 50 million euro loan involving the Bavarian government, it applied for self-administration of its German subsidiaries. A buyer consortium was announced in December 2024, but the promised money did not materialise, and in February 2025 Lilium filed for insolvency a second time and said operations would stop. Around 1,000 employees had already been laid off.
Volocopter's team, then working as e-volo, made what the company describes as the world's first manned flight of an electric multicopter in Karlsruhe in October 2011, a 90 second hop. The company, based in Bruchsal, entered insolvency proceedings in late 2024. In March 2025 its assets were bought by Diamond Aircraft, owned by China's Wanfeng group, for a reported 10 million euros, and fewer than half its employees resumed work. In January 2026 Volocopter said it still aimed for approval of its lighter VoloXPro under EASA's light sport category later in 2026. It survives, but under foreign ownership.
The lesson is not that German deep tech fails. It is that the clusters are very good at the first two stages, turning research into prototypes and prototypes into credible companies, and much weaker at the third: financing the years of certification and manufacturing scale-up that aircraft, chips and energy plants require. Both eVTOL companies needed sums that German and European late-stage investors were not willing to provide, and both turned to public guarantees that did not arrive in time.
What it means for investors
Three practical conclusions follow. First, look for the institution behind the company. A start-up that came out of TUM, RWTH, TU Dresden, KIT or a research-heavy industrial parent usually carries years of prior work and a network of technical staff. Second, watch the industrial partner rather than the headline round. IONOS ordering Q.ANT servers, DEUTZ building ARX vehicles in Ulm, or PepsiCo and Tata Steel installing Kraftblock storage are stronger signals than a press release. Third, ask early who will fund the scale-up. The clusters have solved the start-up problem; the growth-capital problem remains Germany's open question.
Sources
- Sifted: UnternehmerTUM tops Europe's start-up hub ranking
- UnternehmerTUM: Data and facts
- Research in Bavaria: TUM Presidential Entrepreneurship Award
- UnternehmerTUM: TWAICE
- FutureLab Aachen: Startup heaven Aachen
- Silicon Saxony: About us
- eeNews Europe: Dresden memory start-up to debut
- Silicon Saxony: TU Dresden and SpiNNcloud Systems
- TU Dresden: Wandelbots Series C
- Leipziger Internet Zeitung: SPRIND Freedom Act
- Wikipedia: Lilium GmbH
- The National: Lilium files for insolvency again
- AIN: Wanfeng's Diamond Aircraft absorbs Volocopter
- Volocopter: Manned first flight writes aviation history
- AIN: Volocopter confident of light sport certification