The public sector supports startups with countless financing and funding instruments. Which program is suitable for which startup? We've compiled the most important information.
To survive, startups must offer something new or significantly improve existing ones; in other words, they must function effectively in the market. To deliver the desired proof of concept, capital is first needed. However, private investors often shy away from the risk of investing money in an unproven business model. And even if the company is already successful, some companies struggle to acquire urgently needed growth capital. Especially in internationally competitive business areas, delayed growth can lead to being left behind by the competition.
This is where the public sector comes into play: the federal government, the states, and municipalities support startups where financing from the private VC market is not available. Competitions that promise prize money and prestige, The support consists mainly of grants, loans, guarantees and investments.
Before founding the company
The various funding programs are aimed at companies in different stages of their start-up. Financial support is particularly important at the beginning of the start-up process—after all, revenue from operating activities is still a long way off. For start-ups from academia and (former) university graduates in the pre-seed phase, EXIST Funding was provided. Among others, the Munich-based startup FAZUA benefited from EXIST support. Co-founder Marcus Schlüter told us in interview:
“Without the EXIST scholarship, we wouldn’t exist today.”
Also the Business plan competitions from BayStartUP have been a great help to countless startups in the pre-seed phase: Participation is free of charge, and there are individual advice on business plan creation and cash prizes.
Seed and growth stage: Wide range of financing options
In the seed phase, a startup must prove that the world has been waiting for its product. Liquid funds are, of course, necessary for product development, prototype construction, and the company launch. To avoid financial starvation during the transition from the pre-seed to the seed phase, the search for follow-on financing should begin early—approximately six to eight months in advance.
Smaller silent partnerships up to 50,000 euros are provided by the Micro Mezzanine Fund Germany The advantage: The founders don't have to give up any shares when receiving funding—the company remains in their hands.
If you want it a size larger, the High-Tech Gründerfonds (HTGF) a good contact point. Since 2005, 450 companies have received funding from the HTGF.
The program INVEST subsidizes business angels and other private investors when they invest in startups. The young companies must first Have eligibility certified. Afterwards, they can Directory of the Business Angels Network of Germany have it registered.
For startups that want to grow quickly and have the American market in their sights, the German Accelerator Launch support. In two separate programs, the program brings life science startups to Cambridge, Massachusetts, home of Harvard University and MIT, and tech startups to Silicon Valley, San Francisco, and New York. The young companies are connected with mentors, investors, and customers on site. Currently Icaros participates in the German Accelerator in Silicon Valley.
The co-investment fund can also be used to finance innovative tech startups coparion The fund invests up to ten million euros per company, provided private investors participate with at least the same volume and under the same conditions.
Subsidized loans can also be an interesting option. Arranged through your bank, KfW Companies with a reduced interest rate and other favorable options. LfA Development Bank Bavaria offers loans for start-up and growth financing.
Another important contact point is the European Investment FundSimilar to INVEST, this fund promotes investments by business angels through the European Angels Fund (EAF) and offers a range of other financing instruments for startups in both the seed and growth phases. These include the ERP/EIF fund of funds, the ERP VC fund investments and the ERP/EIF Growth Facility.
Further information is available at Special issue of the magazine Founding times and a Funding pilot. A good overview of funding opportunities is also provided by the Funding database of the Federal Ministry for Economic Affairs and Energy.
