The right dare has to be learned

Most of the major parties are promising to combat the lack of venture capital in Germany ahead of the general election. That sounds welcome at first. But whether the situation for start-ups will actually improve in the next legislative period depends on the practical implementation.

Management consultants PwC had already established this at the end of last year: As soon as it comes to large financing rounds, there is a lack of venture capital in Germany. The fact that more start-ups in Germany achieved unicorn status in 2021 than ever before was only possible because a lot of money flowed in from abroad, for example from the United States. This is a problem for the local start-up ecosystem. When founders and investors dare to exit, whether via the stock exchange or a sale, the money no longer ends up in the German cycle, but goes overseas.

It is therefore encouraging that at least the CDU/CSU, SPD, Greens and FDP are addressing the problem in their programs in view of the Bundestag elections. The four parties want to make more venture capital available for start-ups. The models presented include an expansion of the existing "Future Fund", more powers for the KfW development bank and the creation of a secondary market for start-up investments. Depending on party preference, start-ups in future-oriented sectors such as AI and quantum technology or in the area of sustainability should also be promoted.

If implemented correctly, all of these solutions can at least close the funding gap to some extent. However, when it comes to distributing money in particular, the state has not shone with efficiency in recent months. Just remember the disaster surrounding the so-called "November aid", which some entrepreneurs had not even received in February. A certain skepticism towards state VC injections is therefore appropriate.

The idea of using government incentives and adapted regulations to activate institutional investors and other private investors as venture capitalists is much more promising. Insurance companies and pension funds, for example, have vast sums of investment assets that could also help to raise large financing rounds in Germany. If the government could help get this ball rolling, it would be a great help to German founders. It remains to be hoped that the future coalition parties will recognize the advantages of this solution and not succumb to the illusion that the state is the better entrepreneur, like so many of their predecessors.