The lack of investor money is regarded as the reason why the German start-up industry is lagging. (picture alliance/Frank Rumpenhorst/dpa)
The KfW development bank is launching a new subsidiary dedicated to investing in start-ups. Starting in mid-October, it will provide growth companies with urgently needed capital for their expansion, the Federal Ministry of Economics announced in Berlin on Tuesday.
The subsidiary, KfW Capital, is to bundle the bank's existing funding instruments for start-ups and make 2 billion euros available to start-ups over the next 10 years. KfW had already announced the project in the summer of 2017.
Through its subsidiary, the development bank will now invest in venture capital funds, which in turn will take a stake in start-ups or provide them with loans. According to the bank, KfW's promotional volume is to increase to 200 million euros a year by 2020. The bank supports founders across all sectors, from technology to biotech.
Capital for start-ups remains scarce in Germany: while it is still relatively easy for them to raise money to get started, there is a lack of funds in the early growth phase. KfW calculates the gap to be between 500 and 600 million euros a year.
The lack of invest or money is regarded as the reason why the German start-up industry is lagging behind its competitors from the United States, Great Britain and Israel. The Federal Ministry of Economics has recently been more committed to helping start-ups, but industry representatives still see some catching up to do.
KfW has been supporting start-ups for quite some time, for example by participating in the High-tech Gründerfonds, Germany's largest seed-financing fund for early-stage growth companies.
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