Tech

German government launches $12B fund to finance tech startups

Through public-private cooperation the German federal government hopes to provide startups with a total of $50B.

June 29, 2021

BERLIN, GERMANY - AUGUST 29: Riot police observe far-right protesters gathered outside the Reichstag during protests against coronavirus-related restrictions and government policy on August 29, 2020 in Berlin, Germany. Tens of thousands of people from a wide spectrum, including coronavirus skeptics, conspiracy enthusiasts, hippies, right-wing extremists, religious conservatives and others converged on Berlin to attend the protests. City authorities had banned the protests, citing the flouting of social distancing by participants in a similar march that drew at least 17,000 people a few weeks ago, but a court overturned the ban. (Photo by Sean Gallup/Getty Images)

The German government has launched a 10 billion euro ($12 billion) equity fund to support the launch of technology startups in the country.

The state-backed fund was first proposed in August 2020, and is intended to address concerns that entrepreneurs in the country have had to turn to foreign investors because of a lack of domestic venture capital.

In the U.S. government grants for startup businesses are available, yet a small percentage of entrepreneurs take advantage of the funding, which is in part due to the lack of knowledge of these government grants.

The two most prominent awards in the U.S. are The Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) Program. Both are designed to help startups engage in research and development, similar to the Future Fund.

Details of the scheme were revealed earlier this year in March. At the time, Germany’s Federal Minister of Finance, Olaf Scholz, said it was “critical” for the country to provide assistant to startups, and said the state had laid the foundation for boosting the VC market in in the country.

Federal Minister for Economic Affairs Peter Altmaier also said at the time that the government would work also with the private sector, and that in total it would raise at least EUR 30 billion ($35.7 billion) in VC support for startups.

“Combined with our existing financial instruments we will be able to provide over EUR 50 billion ($60 billion) in venture capital for startups in the next few years together with private investors.

“This is unique in Europe and is also a significant contribution by international comparison,” said the minister.