On 27 July 2022, the federal cabinet (Bundeskabinett) adopted the first comprehensive start-up strategy of the German federal government. The aim of the strategy is to strengthen the start-up eco-systems in Germany and across Europe. The resolution of the cabinet fulfils an electoral promise that was reflected in the coalition agreement. In particular, the Greens and the Liberals had promised their voters to break with the traditionally rather stepmotherly treatment of start-ups in Germany. The strategy represents a clear commitment to the relevance of start-ups for the social and economic development of the (German) society, a plea for a good investment case. What is envisaged?
1. Areas of action
On 28 pages, the Federal Ministry for Economy and Climate Protection elaborates on a series of possible measures to be implemented during the current legislative period. Ten following areas of action have been identified:
1. Strengthen funding for start-ups,
2. Make it easier for start-ups to attract talent – make employee share programs more attractive,
3. Spark the start-up spirit – make the founding process easier and more digital,
4. Strengthen female start-up founders and promote diversity in start-ups,
5. Facilitate start-up spin-offs from academia,
6. Improve framework conditions for start-ups dedicated to the common good,
7. Mobilize start-up skills for public procurement,
8. Make it easier for start-ups to access data,
9. Strengthen real laboratories – facilitate access for start-ups,
10. Put start-ups at the center of economic policies.
2. In depth
2.1 Funding
With the Future Fund (Zukunftsfonds) and its individual modules, the government supports innovative technology-oriented start-ups in their growth phase and is making available EUR 10 billion in public funds through Kreditanstalt für Wiederaufbau (KfW) over an investment period until 2030. Together with private investors, the government aims to raise EUR 30 billion in private and public capital. These funds shall be used for important, yet to be prioritized areas of innovation and transformation, in particular artificial intelligence (AI), quantum technology, hydrogen, medicine, sustainable mobility, bioeconomy and circular economy and climate, energy and environmental technology.
The various modules aim at the provision of equity, debt and mezzanine capital to start-ups in their early to late growth phase, partly through direct investment funds, fund-of-funds and venture debt.
In addition to funds and financial instruments that the coalition had already announced or implemented, the federal government shall also provide further means for climate and sustainability technologies in the future. From mid-2022 to 2025, for example, at least one-fifth of new investments under the European Investment Fund shall flow into companies engaged in green innovation, sustainability or social impact. It is also envisaged to revive the INVEST program, which was recently discontinued to the annoyance of many founders. The corresponding funding guideline is planned for 1 January 2023.
Strengthening funding shall be accompanied by adjustments to the legal framework. Envisaged are inter alia adjustments to capital market and corporate laws as well as an improvement of the tax framework. In this context, e.g. the requirements for IPOs shall be eased, in particular with a view to facilitating capital market access of small and medium-sized enterprises (SMEs). In addition, the admission of dual class shares and the facilitation of capital increases are being considered. Unsurprisingly for a strategy paper, the resolution remains vague in this respect and it is certainly important to follow if and what concrete legislative changes are made.
