Federal Government Expands Access to Capital for Startups

Legal Insights Germany

March 14, 2024

The federal government is planning to invest considerable funds into promoting startups investing in artificial intelligence, climate, quantum, or biotechnology, for example, and into increasing exit opportunities for German and European startups. According to the latest plans, a further €1.6 billion from the so-called Future Fund (also known as the Investment Fund for Future Technologies), which was previously held as a strategic reserve, and €150 million from the special assets of the European Recovery Program (so-called ERP special assets) are to be made available for this purpose.

Nowadays, the promotion of startups and young companies is a declared goal of every economic nation. This applies all the more to companies that develop and promote modern technologies that are intended to ensure the competitiveness of markets, especially in international comparison. It goes without saying that Germany cannot afford to ignore this development. The federal government has recognized this and initiated appropriate measures. The aim of this article is to provide an overview of the history of state support for startups in Germany and to highlight the latest developments in this area.

Startup Strategy 2022 - Long Overdue

Historically, German companies have always produced innovations that have not had to shy away from international comparison. These new developments have benefited and continue to benefit both the national economy as a whole and individual citizens. The federal government’s goal is to maintain this level of innovation for the future and promote young companies even more strongly.

At €18 billion, the total investment volume in the German venture capital market had already almost tripled in 2021 compared to the previous year. In an international comparison, however, the share of venture capital investments in Germany in relation to gross domestic product in the corresponding year was mediocre at best—at just 0.47%.

The German government recognized the latter and adopted its first comprehensive startup strategy on June 27, 2022 in order to ensure with a variety of measures and investments that Germany as a business location not only remains sustainable in the long term, but also develops into a leading startup location in the medium term. A total of €10 billion is to be made available under the Future Fund by the end of 2030. If additional funds provided by private and public partners are added to this, a total of over €30 billion in venture capital is to be raised over the corresponding period.

The Startup Strategy 2022 is composed of a total of 130 measures, which are to be implemented during the current legislative period. The fact that 45% of the measures had already been fully implemented by September 2023 is a testament to the successful start. The practical implementation takes place through a variety of differently structured funding programs, under which founders and young entrepreneurs can apply for substantial funding for their ideas. Some of these so-called modules of the Future Fund will be presented below before concluding with the latest developments in the area of state startup funding.    

Funding Programs - Status Quo 

INVEST - Grant for venture capital

The Invest program is certainly one of the best-known funding programs for startups. This is hardly surprising, as it has been in existence since May 2013. The aim of the Invest program is to promote investments by private individuals in startups. The fact that over 17,000 applications for the acquisition grant with a total volume of over €267 million had already been approved by October 31, 2022 demonstrates the effectiveness of the program.

The Invest program was extended for another four years in February 2023 and grants subsidies for investments by private investors in young and innovative companies, in particular for investments by so-called business angels—i.e., people who take a financial stake in companies and often support the founders with expertise and contacts—especially in the early stages. Investors can receive state subsidies of up to €100,000 in addition to their own investment. The minimum investment limit has been reduced from €25,000 to €10,000. This is intended to motivate private individuals in particular to invest in companies with innovative business ideas that are still in their infancy.

DeepTech & Climate Fund (DTCF)

The aim of the DTCF is to promote startups in the field of high technologies. Financial support from the state is particularly important here, as the companies in question have a high demand for capital, and the development of marketable products usually takes a relatively long time. At the same time, however, the earnings prospects are correspondingly lucrative if a high-tech product actually makes it onto the market. The focus of funding here is on companies in the fields of robotics, AI, quantum computing, blockchain, process automation, digital health, and fintech.

As a co-investor, the DTCF invests exclusively together with partners from the private sector. The maximum funding amount per company in all financing rounds is limited to €30 million. In the first financing round, the DTCF invests at least €1 million. The DTCF always acquires a share of less than 25% of the voting rights.

The DTCF will run for at least 25 years (from 2021), with a total investment volume of up to €1 billion available by the end of 2030.

High-Tech Gründerfonds (HTGF)

The HTGF is one of the long-established funds in Germany and has been providing financial support to technology startups since 2005. The funding is aimed in particular at companies from the digital tech, industrial tech, life sciences, and chemicals sectors. Founders from the relevant business areas and young companies (maximum three years old) are eligible to apply. The majority of shares in the respective startup must be owned by management in order to be eligible for funding.

HTGF invests up to €1 million per seed round, either as lead investor or together with other investors. A maximum of €4 million is available as equity per startup.

Venture Tech Growth Financing (VTGF 2.0)

VTGF 2.0 is the successor to VTGF 1.0, which was launched in 2019 and, in contrast to the above examples, is structured as a debt-based fund. In line with the predecessor program, VTGF 2.0 involves joint financing by the federal government and private lenders. The state-owned KfW banking group and the federal government are making a total of €1.2 billion available for this purpose up to 2030; funding is possible across all growth phases and in amounts from €1 million up to €125 million. The participation of a private lender is always required, which generally assumes a financing share of 50% and on the same terms (pari passu) as KfW.

Latest developments - quo vadis?

As outlined at the beginning, a further €1.6 billion from the Future Fund and €150 million from the ERP Special Fund are now to be made available to promote startups in Germany and make the Federal Republic competitive, particularly in the field of high technologies. According to a joint press release from the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Climate Protection dated February 7, 2024, the plan is to use the corresponding funds as follows:

  • Together with private investors, KfW is to use €850 million for direct investments in young tech startups. The aim is to make the supported companies internationally competitive and to establish Germany as a future-proof location in the tech sector.
  • Germany plans to invest a maximum of €500 million in exit financing for European tech champions. Together with European partners, the aim is to establish a European exit initiative and lay the foundation for ensuring that successful German and European startups do not switch to non-European markets for exits.
  • KfW is to invest €200 million to ensure the continuation of the successful Growth Fund Germany, in particular by mobilizing further capital from institutional investors.
  • Finally, €200 million from KfW is to be invested in impact venture capital funds. These are funds that are not only intended to generate financial returns, but also aim to achieve positive social or ecological effects under the heading of impact investing.

Specific projects in which the aforementioned funds are to be used are now being developed. Gradual implementation is planned for the end of 2024.


For a long time, venture capital investments were neglected in Germany. The federal government mainly relied on the initiative of founders and investors. State funds were made available to an insignificant extent, especially in international comparison. However, the federal government has now clearly recognized that such an approach will not be able to secure the competitiveness of the German startup scene in the long term. In times of transforming globalization and realigning supply chains, it is all the more important that Germany pulls out all the stops and does not shy away from corresponding investments in order to remain competitive on an international level or to become competitive in some areas.

The actual implementation of the planned projects remains to be seen. However, it is certain that the federal government has recognized the importance of supporting young local companies, particularly in the high-tech sector, and is prepared to provide the necessary funding.


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