Venture Tech Growth Financing – next component of the Future Fund launches

• Substantial expansion of the Venture Tech Growth Financing (VTGF 2.0) product as part of the Future Fund (“Zukunftsfonds”)
• Sustainable support for the entire venture ecosystem for fast-growing, technology-focused start-ups and their founders, and the creation of pioneering jobs in Germany
• KfW and the German Federal Government will provide EUR 1.2 billion by 2030 for joint financing with private lenders ranging from EUR 1 million to EUR 125 million across all growth phases
• VTGF 2.0 is the link between equity and traditional debt financing

The Federal Government and KfW are set to provide a volume of EUR 1.2 billion for the Venture Tech Growth Financing (VTGF) product. Called “VTGF 2.0”, the funds provided form the next component of the equity fund for future technologies (“Future Fund ”) and are based on the KfW programme “VTGF 1.0”, which was launched in 2019. Venture Tech Growth Financing offers loans to technologically innovative, fast-growing companies with a resilient and promising business model to finance further growth. Typical projects include investments to scale up business models or implement measures to promote growth, including working capital financing.

Federal Ministry of Finance State Secretary Dr Carsten Pillath states, “The VTGF 2.0 represents the ongoing development of the predecessor programme VTGF 1.0 and, to date, is the only debt capital-based component within the Future Fund. This makes it possible to offer specific support to innovative companies across key development phases as they become established – without restricting the autonomy of entrepreneurs. The programme provides a positive impetus both for the previously rather weak German venture debt market and for the entire VC ecosystem in Germany.”

As Federal Ministry for Economic Affairs and Climate Action State Secretary Udo Philipp explains, “The aim of the Federal Government is to provide financing opportunities in Germany for technology-focused start-ups at every stage of corporate development. In particular, the Future Fund is geared towards expanding the financing on offer during the growth phase. Expanding the German venture debt market through VTGF 2.0 plays a key role here. In the late growth phase in particular, venture debt is often attractive for start-ups and represents an important bridge between VC financing and traditional debt financing.”

Stefan Wintels, Chief Executive Officer of KfW, had the following to say: “At KfW, we want to make an effective contribution to bringing about a successful transformation of the economy and society. A central element here is the expansion of our promotional offer in innovation and strengthening the financing ecosystem for fast-growing technology companies. At the same time, the increased raising of private capital is crucial to the success of the transformation. The launch of VTGF 2.0 marks an important milestone for us, and it will be followed by further steps.”

VTGF 2.0 will, in future, also make it possible to issue debt capital to listed technology companies (post-IPO debt). Furthermore, the financing needs between two equity rounds can be covered by equity bridge loans. KfW’s maximum share of financing in a transaction is increasing from generally EUR 22.5 million (VTGF 1.0) to EUR 125 million (VTGF 2.0). In addition, KfW can offer the private lender refinancing (without a liability waiver) of its share if required.

The prerequisite for financing from the KfW Venture Tech Growth Financing programme is the involvement of a private lender as financing partner that generally contributes 50% of the financing on the same terms (“at an equal pace”). The funds are made available to the company by KfW at market conditions.

About VTGF 1.0
The “Venture Tech Growth Financing” (VTGF 1.0) product was introduced as part of the reorganisation of KfW equity financing. The promotional policy objective was to close the supply gap between venture capital and traditional debt-capital financing with a venture debt financing offer for fledgling technology-focused growth companies. Together with private lenders, it has been possible to provide approximately EUR 360 million (of which EUR 106 million is KfW funds and more than EUR 250 million is private debt capital) across 11 transactions. As a result, more than 20 founders, and their more than 60 private VC donors, have received support to grow their companies without further dilution of their shares. In this way, VTGF has already secured or created more than 3,750 pioneering jobs.

About the Future Fund for Germany
The Federal Government’s Future Fund, which will grow to EUR 10 billion by 2030, comprises several components to promote the various development phases of innovative technology companies – with a focus on growth financing. It will contribute to strengthening the venture capital market and financing conditions for innovative, technology-focused growth companies on a sustainable basis while substantially leveraging private capital. The Federal Government has appointed KfW to implement the Future Fund, with KfW Capital responsible for coordination within the KfW Group. The first components were launched in 2021. Counting the EUR 1.2 billion for VTGF 2.0, a total of around EUR 8.2 billion is now available to be invested by 2030. Further components are in the design phase and will be introduced according to the needs of the market.

(Information on the individual components can be found at: Federal Ministry of Finance – Future Fund or BMWK – Future Fund)