This paper is focused on the cost of raising capital in Germany. It challenges the conventional wisdom that external financing technology is characterized by economies of scale and, hence, marginal external financing costs are decreasing. In order to achieve this goal, a cross-sectional analysis of flotation cost data for 117 IPOs on the German capital market over the years 1993-1998 has been carried out. By applying a principal component analysis within a generalized weighted least squares framework we will be able to test different specifications for an average underwriting fees and non underwriting costs function. First of all, it may be interesting to see that average total flotation costs in Germany amount to 7.77 percent (median 7.30 percent) of gross proceeds, while average underwriting fees amount to 5.01 percent (median 5.00 percent). These figures seem to be relatively low compared with available results for other countries. As far as flotation cost structure is concerned, we find issue size as well as issuer risk and offering method complexity to have an economically meaningful and significant impact on average underwriting fees. Moreover, we do not find support for economies of scale in external financing activities in the sense that, other things equal, marginal spreads seem rather to be constant in gross proceeds. Hence, marginal costs of raising equity capital seem not to be decreasing. In addition, we found them to be higher for more riskier and more complex offerings. This corroborates the view that offerings which are likely to require greater underwriting services encounter higher marginal spreads. Finally, fixed costs account on average only for 5 to 9 percent of underwriting fees, but for 52 to 63 percent of non underwriting costs. Hence, due to the moderate relative size of non underwriting fees also average fees seem to be rather constant. This is why in our view it is unlikely that external financing costs have a significant impact on optimal firm size.