BDI plans for the Future Fund do not go far enough

The Federation of German Industries criticizes that start-ups in the growth phase too often lack financing options. The Federal Government's planned Future Fund would only benefit companies that already had access to venture capital anyway.

The proposed fund of the German government does not go far enough for the Federation of German Industries (BDI). The coalition has agreed to invest ten billion euros of taxpayers' money in a venture capital fund from 2021 to 2030. Together with private investors, 30 billion euros in venture capital are to be made available in this way. The BDI fears that this fund envisaged by the German government will only benefit companies that already have good access to venture capital. KfW's condition that only other venture capitalists participate in start-ups is not sufficient for the association. KfW should also be able to invest directly and without partners in exceptional cases.

For this purpose, the BDI proposes a mixed-financed "Growth Fund Germany" with as much private financing as possible. It should complement the existing funds. The BDI would like to see a fund volume of ten to twenty billion euros in the medium term, "in order to be able to keep up with foreign investors". The fund should be allowed to finance the expansion of young German companies or the establishment of new, high-risk business areas. Initially, it is to be limited to Germany and later expanded across Europe.

Currently, almost every second company in the growth phase has problems raising fresh capital. This is shown by a survey of the German Startup Monitor 2020. "This result is an alarm signal," writes the BDI in its paper. "Since startups rarely have financial reserves to fall back on, slumps in sales as well as investors jumping ship due to the current uncertainties in the corona crisis pose a great danger." When startups fail to get German or European growth funding, many look to foreign investors for their fortune and are taken over.

Europe lags behind the world in investing in the future. In 2018, €18 billion in venture capital was available across the European Union. The US raised just under four times that amount. China invested the equivalent of €33 billion. Since 2010, only 29 so-called unicorns, companies with a market valuation of one billion US dollars, have emerged in the EU. There were 139 in the US and 81 in China.