Federal Ministry of Economics significantly reduces subsidies for venture capital!

The BMWK is adjusting the rules of the game: Startups must prepare for a reduction in the acquisition grant in the INVEST program from 25% to 15% of the investment amount. What impact will this unexpected cut have on the future of the innovative start-up scene?

Berlin - From March 6, 2024, the INVEST program, which brings startups and private investors together, will introduce a new funding guideline. The most serious change concerns the reduction of the acquisition grant from 25% to 15% of the investment amount.

What is the Invest - grant for venture capital

The INVEST programme, initiated by the Federal Ministry of Economics and Climate Protection (BMWK), plays a decisive role in mobilizing private venture capital from business angels. This acquisition grant enables business angels to receive 15% of their investment back tax-free if they invest at least EUR 10,000 in venture capital in start-ups. An additional exit grant facilitates the lump-sum reimbursement of taxes on profits from the investments.

Since May 2013, the BMWK has established the INVEST program to promote tax-free private investments by so-called business angels in start-ups. The previous amount of the acquisition subsidy was 25% of the investment sum.

The main objective of INVEST is to support young and innovative companies in their search for investors to provide the necessary start-up capital. At the same time, the program is intended to motivate private investors, in particular business angels, to provide more venture capital for these companies, or to provide it in the first place.

Significant reduction

The BMWK's decision to reduce the acquisition subsidy from 25% to 15% comes as a surprise to many. The subsidy plays an important role for start-ups in the early stages, which often fail due to a lack of venture capital. The reduction in the funding amount could create new challenges for start-ups, as it will be more difficult to find investors.

Reactions from the startup community to this unexpected cut are mixed. Some see it as a potential obstacle to the financing of promising ideas, while others point to the continued benefits of the INVEST program.

Startup association expresses criticism

The German Startup Association is critical and disappointed about the sudden and unannounced reduction in the INVEST grant for venture capital as of March 6. The reduction of ten percentage points represents a considerable setback for business angels and start-ups. Especially in an already tense financing situation for start-ups, the federal government's decision sends a fatal signal. This is in clear contradiction to the public statements of the traffic light coalition that it wants to strengthen the location for start-ups.

The fact that the federal government is now scaling back its commitment in an already tense financing situation for start-ups is a fatal signal.

Startup Association (Linkedin, 6.3.24)

The Startup Association emphasizes that the current measures are obviously setting the wrong priorities in the promotion of innovation and entrepreneurship. This is particularly true in view of a federal government that describes itself as a "progress coalition". The association urgently appeals to those responsible to examine whether a financial increase can be considered in order to reverse the cuts and thus turn the government's words into action.

Ultimately, it remains to be seen how the new funding guidelines will affect the dynamics of startup financing and whether the announced changes will compromise the purpose of the INVEST program.

The Startbase is also critical of the sudden reduction in the INVEST grant. This decision significantly increases the attractiveness of alternative asset classes and investment opportunities, while at the same time making it more difficult for promising innovations from the startup economy to access urgently needed venture capital. The reduction of the acquisition subsidy could potentially result in innovative ideas and emerging companies facing greater hurdles to successfully realize their visions. Startbase is closely monitoring the impact of this measure on the start-up scene and will continue to report on developments in this area.