Key promotional area: Innovation – business sector Mittelstandsbank (SME Bank)
Promoting innovation for greater competitiveness and digital transformation
As one of the key challenges facing the German SME sector, digital transformation is putting competitiveness on digital markets to the test. In addition to brisk innovation activity, the rapid spread and commercialisation of new digital products, processes and services are an absolute must when it comes to maintaining competitiveness.
KfW’s new ERP innovation promotion as a key promotional instrument for financing digital transformation
With a commitment volume of EUR 1.54 billion since the programme was launched in the second half of the year, the new “ERP innovation promotion” product family got off to a very successful start. The integrated promotion of innovation and digitalisation is KfW’s way of responding to the future trend of digitalisation in a focused manner and combining it with conventional forms of innovation financing in order to provide targeted support for digital transformation and its innovation potential in the future.
As well as expanding the range of areas in which financing can be used to include digitalisation, KfW is now collaborating with the European Investment Fund (EIF) and is offering to assume 70% of the credit risk for its financing partners as part of the ERP digitalisation and innovation loan to make them more likely to finance innovative or digital projects that are more difficult to assess in terms of their success potential.
In order to improve their balance sheet structure and credit rating, companies opting for the ERP mezzanine for innovation can still make use of the financing package from its predecessor programme, comprising a conventional loan and a loan largely classified as equity (subordinated capital), without having to furnish additional security for the subordinated capital. This offering is complemented by pure debt financing for projects that are novel in the EU based on particularly attractive conditions.
Innovation and growth driver: venture capital for the start-up and growth phase
- Good prospects for the German venture capital market.
- KfW provides support in all stages of development.
KfW's equity financing offering to technology-oriented start-ups and innovative businesses
Venture capital market in Germany: prospects are good but a catch-up is needed
On the one hand, Germany has developed a very dynamic start-up scene in recent years. Digitalisation of the economy and Industry 4.0 will continue to boost this trend.
On the other hand, however, Germany's venture capital market as measured against the country's total economic output remains small compared to the United States in particular. The USA invests around twelve times as much venture capital as a percentage of gross domestic product (GDP) as Germany, according to OECD statistics.
There is currently a gap in the stage in which companies tap new markets and grow quickly. There is still a considerable need for a greater supply of capital in this segment.
KfW provides support in all stages of development.
The High-Tech Start-Up Fund is the most important and largest source of venture capital in the seed phase. We support young and innovative companies in the start-up and growth phase through ERP Venture Capital Fund investments and coparion.
KfW will make a total of more than EUR 600 million in venture capital available to the venture capital market in the next few years through ERP Venture Capital Fund Investments and coparion alone, thereby leveraging a total investment volume of around EUR 2.5 billion.
Equity financing instruments
Read more on our key promotional areas in 2017
The information contained in this online Annual Report 2017 is based on KfW’s Financial Report 2017, which you can download Should this online Annual Report 2017, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Financial Report, the KfW Financial Report 2017 takes priority..