More money for startups: The federal government wants to increase venture capital investments in Germany through several different financial instruments.
Between 2013 and 2015, the German venture capital market quadrupled to a volume of over three billion euros. However, Germany still ranks third in Europe, behind Great Britain and Sweden. The German government apparently wants to change this. In a joint guest article for Handelsblatt, Matthias Machnig, State Secretary in the Federal Ministry for Economic Affairs and Energy, and JMr. Spahn, Parliamentary State Secretary to the Federal Minister of Finance, today outlined the federal government's plans. The authors write the following background information:
“Improving the success of young, innovative companies during their growth phase is important to strengthen Germany as a business location and to secure competitive, high-quality jobs in the long term.”
Subsidies only in case of market failure
To this end, government instruments are intended to strengthen the growth financing of startups. The means of choice are "market-based approaches," in particular, financing levers: The government tops up private investments on equal terms, thereby mobilizing private capital for startups.
“Only where we have real market failure – for example, in the early seed phase – do we provide additional funding.”
One of the lever instruments mentioned is the ERP/EIF Growth Facility with a volume of 500 million euros.
Venture Debt and a new “Tech Growth Fund”
The authors see the link between the VC and banking markets Venture Debt, separate loans for more mature startups with higher interest rates, short terms, and participation by the lender in the startups' value increases. However, the venture debt market in Germany is still very underdeveloped.
A "Tech Growth Fund" to be established jointly with KfW (KfW) is intended to provide relief. The fund's goal is to mobilize several billion euros in venture debt for follow-up financing of startups.
