On November 27, the Bundestag's Budget Committee cleared the way for the €10 billion "Investment Fund for Future Technologies." The future fund has a ten-year timeframe. The federal government also sees it as an instrument to guide startups out of the coronavirus crisis in the medium term.
Following approval by the Budget Committee, the government has now finalized its concept for the fund. The funds will be distributed to public venture capitalists, such as KfW Capital, the European Investment Fund, or the High-Tech Gründerfonds. These will then allocate the money directly to startups through their funds.
Two new funds
New funds are also planned for creation. A new deep-tech fund is to be established to finance groundbreaking technologies, such as in the fields of artificial intelligence or biotech. In addition, one billion euros will be invested in the new KfW Capital fund of funds. This fund is intended for large financing rounds for startups that have already proven their business models. In this way, it is intended to reduce the dependence of German startups on foreign investors for financing of one hundred million euros or more.
According to EY's "Venture Capital and Startups in Germany 2019" report from the beginning of the year, about half of the $4.8 billion raised by the top 100 startups in 2019 was accounted for by ten tech startups that completed at least one Series D financing. Thomas Prüver, Partner in EY’s Transaction Advisory practice and responsible for technology transactions, explained at that time:
"Late-stage financing is still almost exclusively carried out by international investors; German venture capitalists play almost no role here. The beneficiaries are usually startups whose business model has already proven to be functional and scalable, meaning it can be transferred to other markets internationally. In the future, it would be desirable for more German investors to be able to lead later and larger financing rounds."
Government expects 60 billion euros in investments
In addition to the €10 billion Future Fund, the government had already provided a total of €8 billion in funding for startups in recent years. With the €2 billion planned for pandemic aid, the federal government will now have a total of €20 billion in direct investments, according to the Startup Commissioner. Thomas Jarzombek in a press conference. This money should attract further funds from private investors:
"We're investing with the market. This will then incentivize private funds at a ratio of 2 to 1, bringing the total to around 60 billion euros."
