MUNICH (dpa-AFX) - Germany's niche venture capital scene, backed by the federal government, is courting the financial market's heavyweights. In a strategy paper to be presented in Berlin this Monday in the presence of Economy Minister Katherina Reiche (CDU), 24 funds and investors argue that 15 billion euros in annual venture capital for promising start-ups could reignite German economic growth after years of stagnation. The primary targets are major asset managers and institutional investors.
The 24 funds have formed the 'German Venture and Growth Forum' and point to the United States, whose economic growth has significantly outpaced the EU over the past 25 years. Many of today's immensely valuable and profitable US tech giants emerged from start-ups that benefited from venture capital in their early years. The core argument: no growth without venture capital.
'The widening economic gap between the USA and Europe is largely due to the lack of growth capital,' argues tech investor Alexander Kudlich. The 24 funds cite estimates suggesting that start-ups in Europe could create millions of jobs and reach a capitalization of over three trillion dollars, provided sufficient capital is available.
... because without funding, a start-up cannot become a major corporation
The initiative addresses a long-standing but unresolved issue: in Germany, state subsidies are often available for start-ups in the founding phase. However, even for promising young companies with innovative technology, it often takes many years to turn a profit. In the meantime, these firms rely on external investors to bridge the loss-making phase.
Germany still lacks this type of financier; currently, only defense start-ups find investors effortlessly. Banks are generally ruled out as lenders because institutions only lend to healthy companies and are prohibited from taking excessive risks. 'There is a lack of funding across all growth phases of fast-scaling tech companies,' writes Martin Blessing, the former Commerzbank CEO and current investment advisor to Chancellor Friedrich Merz (CDU), in the paper.
The target group has sufficient capital
This is aimed at Europe's major asset managers, many of which are owned by banking groups and insurance companies. Unlike banks, asset managers do not grant loans but invest their clients' funds in all types of bonds, equities, and other securities. One European powerhouse in this field - though not named in the paper - is Allianz, whose two investment companies managed over two trillion euros in client assets at the end of the first quarter. The obstacle: asset managers are cautious in their investments, and venture capital has therefore not been part of their core business to date./DP/zb
