The Federation is providing €10 billion for a venture capital fund for forward-looking technologies (“Future Fund”) at the KfW to foster the German venture capital market. The Future Fund combines a quantitative and qualitative expansion of existing funding programmes. It also comprises the development of new instruments. The aim is firstly to address all development phases of start-ups with a focus on the expansion of growth financing and secondly to give greater consideration to market segments that have previously not been sufficiently covered. The Future Fund consists of several closely linked modules which are to serve as a toolbox. .
Assistance from the ERP Special Fund
The ERP Start-up Loans and ERP Capital for Start-ups programmes offer a tailored set of instruments to provide outside capital, offering start-ups and young companies the capital they need to launch, start growing, and transfer to a next generation.
The Economic Affairs Ministry’s ERP Start-up Loan programme offers low-interest loans to fund commercial and professional start-ups and young companies for up to 3 or 5 years after the launch. The ERP Start-up Loans programme consists of two parts: The “ERP Start-Up Loan Startgeld” (Start-Up Money) provides a maximum of €100,000 in loans to help small-scale start-ups. The ERP Start-Up Loan Universell (Universal) offers a maximum of €25 million in loans to larger start-ups. .
The Economic Affairs Ministry’s ERP Capital for Start-ups programme offers low-interest equity-like capital in the form of subordinate loans to fund start-ups and young companies for up to 3 years after the launch. .
Since October 2018, KfW Capital has been investing in German and European venture capital and venture debt funds. The aim is to give young, innovative, fast-growing technology companies in the start-up and growth phase in Germany better access to venture capital from highly-capitalised funds. With assistance from the ERP Special Fund, the KfW’s existing volume of investment is to be boosted by an average of €200 million a year up to 2020. KfW Capital is an investment subsidiary of KfW Bankengruppe and a joint initiative of the Economic Affairs Ministry, the Finance Ministry and the KfW. Find out more at .
Small and medium-sized enterprises generally rely on bank loans for their finance. In return, the banks require collateral, something which many SMEs lack. Here, guarantees from the Federal Government, the Länder and the guarantee banks supported by the Federal Government and the Länder offer an effective remedy for an otherwise viable project which lacks collateral. .
“Business Start-ups in Science” programme (EXIST):
Higher education and research establishments are some of the most important sources of new technologies, innovative products and services. The EXIST programme cooperates with such institutions to offer a range of assistance for start-ups.
Since 1998, the Federal Government has used its “EXIST” programme to promote measures to instil a culture of self-employment and to boost the spirit of entrepreneurship at higher education and non-university research establishments. The aim is to raise awareness, motivate and qualify students, graduates and academics to start up companies and to provide them with initial funding for the seed or start-up phase.
The grants available from the EXIST programme form part of the and consist of three pillars: “EXIST Start-Up Culture”, “EXIST Research Transfer” and “EXIST Start-up Grant”. The launch of the “EXIST Start-up Germany” model project has also opened up the programme to people from other countries. .
INVEST – Grant for Venture Capital
The “INVEST – Grant for Venture Capital” programme helps young, innovative companies to find someone to provide capital. Business angels get 20% of their investment reimbursed tax-free if they invest at least €10,000 in start-ups. This reduces their risk when they invest in bold ideas. INVEST improves the prospects for innovative firms to find a private investor. In this way, everyone benefits from the government support. INVEST is tailored to the target group and can therefore take even better account of the distinct features of the private venture capital market in Germany. .
High-tech Start-up Fund
The Economic Affairs Ministry’s High-tech Start-up Fund supports capital-intensive technology-based start-ups. Innovative and technology-based start-ups tend to be highly complex and capital-intensive. Also, they entail particularly high market, management and technical risks. Many young technology-based companies and start-ups therefore find it difficult to obtain finance. For this reason, the High-tech Start-up Fund was set up in 2005 to invest venture capital in new German technology-oriented companies and thus to help close the financing gap in this early-phase segment. .
Further to this, there are other instruments for the financing of innovation, growth and venture capital, such as the ERP/EIF Fund of Funds, the European Angels Fund, the new coparion fund, the ERP/EIF Mezzanine Fund of Funds for Germany, the ERP/EIF Growth Facility and the ERP-VC Fund Investments. These instruments are explained in the “Financing innovation” chapter.
Micro-Mezzanine Fund Germany
The Micro-Mezzanine Fund Germany aims to strengthen the equity base and thus creates new financing possibilities for small and new companies.
Many very small companies and start-ups find that a lack of equity capital prevents them from accessing loans. In order to open up better possibilities for such companies to access finance and to increase their risk-bearing capability, the Economic Affairs Ministry set up the Micro-Mezzanine Fund Germany in 2013, which reached a total of €75 million at the end of 2015 (Fund I). A further €153 million is available for the 2014-2020 period (Fund II). The instrument, which is co-financed by the European Social Fund (ESF), provides companies with venture capital of up to €50,000 for a ten-year period, or up to €150,000 for special target groups. .
German Micro-loan Fund
The Micro-loan Fund Germany is a well-established instrument for the allocation of micro-loans in response to the financing needs of small companies which would otherwise have no access to borrowing. The fund is aimed at small and young start-ups and companies, and at persons who are self-employed and pursuing a creative venture. The total loan amount must not exceed €20,000. .