Public Equity Capital
Start-ups and technology companies are often financed by a high degree of equity
capital. However, equity capital also represents an efficient method of business activity financing for companies from the classical industry sectors. In Germany, equity capital from public sources is available from a number of different investor channels.
Choosing Appropriate Public Equity Capital Providers
Depending on a company’s growth phase status as well as its industry sector, different amounts of equity capital will be needed.
Start-ups are normally looking for seed financing for market entry. In this case, the
selection of a venture capital provider is a suitable solution.
Growing enterprises with a sound track record usually need higher amounts of capital in order to further expand. MBGs are in place to offer higher volumes of capital for expansion financing. So called “pitch events” are one way of getting in touch with venture capital companies.
Enterprises in a later stage of development are often contacted directly by providers of equity capital looking for investment opportunities. They may also contact equity capital providers directly.
High-Tech Gründerfonds and coparion
The High-Tech Gründerfonds (HTGF) is the largest and most active seed stage fund in Germany focusing on technology driven start-ups. The initial investment totals EUR 1 million. The maximum possible HTGF investment level available amounts to EUR 3 million per enterprise.
HTGF support goes beyond providing money for realizing new business ideas.
It also offers a high level of technology expertise, a broad network of scouts and
capital providers to secure further growth of the new company after the seed phase. Besides the KfW and the Federal Ministry for Economic Affairs and Energy, more than 15 renowned German corporations have provided capital to the fund.
Coparion offers young and innovative companies in the start-up and early growth
phases direct access to funds of up to EUR 10 million in several rounds. Coparion
adheres to a principle of investing in companies who have their headquarters in Germany, and together with other investors subject to the same conditions and amounts.
With assets of EUR 225 million under management in 2017, coparion has the required flexibility to invest in promising businesses.
Public VC in the Federal States
Venture capital companies (VC) in the federal states offer equity financing to young
and innovative enterprises to support early stage development. These VCs act as
subsidiaries of the development banks of the federal states and support companies
actively by providing risk capital as well as management and industry knowledge for
their further development.
The investment focus is on innovation and is mainly in industry sectors including ICT,
life sciences, and new materials. Subject to the regulations of the individual venture
capital company, financing volumes of up to EUR 5 million are achievable.
Public-Private Equity in the Federal States
For established companies seeking to finance further growth, but for start-ups as well, Mittelständische Beteiligungsgesellschaften (MBGs - “Public-Private Equity Companies for Small and Medium-Sized Enterprises”) are available as financing partners in the federal states. As independent institutes, they are supported by the federal states.
MBGs operate primarily through silent participation through the provision of subordinated capital. They have no investment focus on special industry sectors.
ln North Rhine-Westphalia, support in the field of venture capital also is offered by the
NRW.BANK and the Kapitalbeteiligungsgesellschaft NRW (KBG NRW). The range of
support and programs refers to the company‘s growth phase and the sector of indus
try and conditions are negotiated on a case-by-case basis. For instance,the programs
„win NRW.BANK Business Angels Initiative“, „NRW.BANK Seed Fonds“, the „NRW.
BANK.Venture Fonds“, the NRW.SeedCap Digitale Wirtschaft“ and „NRW.BANK.Mittel
standsfonds“ belong to this incentive spectrum.
Loans can be an alternative to grants or venture capital because they entail several
- apart from some loans referring to specific target groups or sectors (e.g. start-ups,
- digitalization, energy, electromobility) a tot of them are not
- attached to a specific field
- application is possible at all times (no deadlines), and
- they can cover higher project costs.
These low-interest credits which are provided in a house bank procedure are provided
by different governmental programs. For instance, the “ERP Innovation Program” is pro
vided by the German Government and it is transacted by the KfW.
In North Rhine-Westphalia, the NRW.BANK offers a wide range of loan programs, such as:
NRW.BANK SME Loan: This is a low-interest loan in from NRW.BANK to finance small
and medium-sized enterprises, and independent professionals. The NRW.BANK SME
Loan is available as both an investment loan and a working capital loan. The amount of
the loan can range from EUR 25.000 to EUR 10 million.
NRW.BANK.Universal Loan: This program is offered for business founders, small and
medium-sized companies as well as freelancers. E.g., it is possible to finance resources
and equipment by this program. A minimum or maximal amount of the loan does not
NRW.BANK.Digitalierung und Innovation Loan: Small and medium-sized enterprises
and freelancer can get loans in the field of digitalization and innovation. The amount of
the loan is at least EUR 25,000.
NRW.BANK.Elektromobilität Loan: This credit program is offered for supporting the
electric vehicle industry. Eligible are investments as well as R&D projects. The amount of
the loan range from EUR 10,000 to EUR 5 million.
NRW.BANK Start-Up Loan: Business founders can be supported with loans ranging
from EUR 25.000 to EUR 10 million. The financing portion may amount to up to 100
percent of the eligible investment costs or working capital. The acquisition of land and
buildings as well as furniture and fixtures and the takeover of existing SMEs are also
eligible for funding. The NRW.BANK start-up loan is offered with terms of five, ten or
twenty years. The start-up loan includes an optional indemnity bond from the Bürg
schaftsbank NRW, for which business founders may apply as part of a standardized process.