Germany preps $23B in fresh funds to boost VC ecosystem

The German government plans to dedicate billions of euros to encourage venture investments in the country. 

Speaking at SuperVenture 2021 in Berlin, Thomas Jarzombek, the German commissioner for the digital industry and startups, detailed several initiatives—worth a total of €20 billion (about $23 billion)—that Germany is undertaking to create better conditions for startups and VC funds to thrive.

Among the measures is a new fund-of-funds to back European VCs, on the condition that they partly invest in Germany. The vehicle, which is still being prepared, will be managed by KfW Capital, a subsidiary of state-owned KfW Bank, and will include both private and public money. The aim is to encourage more German institutional investors to be active in venture capital by reducing risk.

"I think this is great news [for German startups]," Jorg Goschin, co-CEO and senior managing director of KfW Capital, said at SuperVenture. "We have a strong early-stage market in Germany, but we need more growth stage. By multiplying the volume of available capital, we can give startups with strong European ties an alternative way to raise money."

Most of Germany's late-stage funding is driven by foreign investors, with many of the country's largest venture rounds not featuring any local backers. In 2020, a record 150 deals worth €4 billion included US-based firms compared with just 76 deals five years ago totaling €784.3 million, according to PitchBook data.

The German government previously announced a €10 billion Future Fund and a specialized deep tech fund which are also aimed at providing more capital to domestic startups. Jarzombek said that he expects around €40 billion in private capital to accompany the government's money, giving the country a total of €60 billion of new funds.