BDI plans for the Future Fund do not go far enough

The Federation of German Industries criticizes the fact that start-ups in the growth phase too often lack financing options. The German government's planned future fund would only benefit companies that already have access to venture capital.

The federal government's planned fund 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 between 2021 and 2030. Together with private investors, 30 billion euros in venture capital is to be made available. 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 it only participates in start-ups with other venture capital providers is not sufficient for the association. In exceptional cases, KfW should also be able to invest directly and without partners.

The BDI proposes a mixed-finance "Growth Fund Germany" with as much private financing as possible. It should supplement 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.

At present, almost every second company in the growth phase has problems raising fresh capital. This is shown by a survey conducted by the German Startup Monitor 2020. "This result is an alarm signal," writes the BDI in its paper. "As start-ups rarely have financial reserves to fall back on, a slump in sales and the departure of investors due to the current uncertainties in the coronavirus crisis pose a major risk." If start-ups do not receive German or European growth financing, many seek their fortune with foreign investors and are taken over.

Europe is lagging behind the rest of the world when it comes to investing in the future. In 2018, 18 billion euros in venture capital was available in the European Union as a whole. The USA raised almost four times as much money. China invested the equivalent of 33 billion euros. Since 2010, only 29 so-called unicorns, i.e. companies with a market valuation of one billion US dollars, have emerged in the EU. There were 139 in the USA and 81 in China.