This policy paper shows the development of foundations of new companies and start-ups in Germany and, after a look at the international venture capital markets, presents the Future Fund, with which the German government wants to put start-up financing on a new footing.

Start-ups and venture capital in Germany: Does the Future Fund bring new impetus to the start-up culture?
German Economic Institute (IW)
This policy paper shows the development of foundations of new companies and start-ups in Germany and, after a look at the international venture capital markets, presents the Future Fund, with which the German government wants to put start-up financing on a new footing.
Start-ups have an important function in a functioning market economy, bringing new ideas and products to the market and providing competition by attacking the market position of established companies. While the number of company formations in Germany has been declining for years, a growing start-up scene of innovative and growth-oriented start-ups and young companies has established itself in the German metropolitan regions with Berlin at the forefront. However, despite various government programs to provide venture capital, financing start-ups still proves difficult. A particular problem is the financing of larger growth steps in the years after the company's founding phase, as start-ups often have higher capital requirements in this later-stage phase. But public funding programs and domestic venture capital funds are mostly tailored to the pre-founding and immediate start-up phase. Politicians have recognized this problem and are currently addressing it with a “Future Fund” (Zukunftsfonds) comprising 10 billion euros in public funding over ten years via ten different fund components. By mobilizing additional private capital, the total volume available is to be increased to 30 billion euros, which will also be available for larger later-stage financing thanks to the structure of the individual funds. The paper concludes with a predominantly positive assessment of the new funding program and further suggestions for strengthening the startup location addressing taxation and regulatory issues.

Start-ups and venture capital in Germany: Does the Future Fund bring new impetus to the start-up culture?
German Economic Institute (IW)
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