KfW Capital – responsible VC fund investor
Innovative technology companies in Germany should have better access to growth capital. That’s why the new KfW subsidiary KfW Capital is investing in German and European venture capital funds with the support of the Federal Government’s ERP Special Fund and substantially increasing the volume of KfW’s equity financing to date. KfW Capital will invest around EUR 2 billion, i.e. around EUR 200 million p.a. over the next ten years, thereby leveraging additional capital from other investors. KfW Capital was formed in July 2018 and operations commenced on 15 October 2018.
KfW Capital is making an active contribution to the further development of the VC ecosystem in Germany and Europe. The target funds include both already established VC funds and first-time funds, in order to increase the number of venture capital providers. The financial company invests a maximum of EUR 25 million and a maximum of 19.99% of the total fund volume in each fund. KfW Capital’s investments are always made “pari passu” with other investors. The VC funds must invest at least the amount of KfW Capital’s investment in innovative technology companies in Germany. KfW Capital follows the sustainability guidelines of KfW Group’s domestic promotion in its investments.
A total of EUR 310 million was invested in 20 funds between the launch of the “ERP VC Fund Investments” programme and 31 December 2018. At EUR 124.2 million, the figure for last year was significantly higher than that for 2017 (EUR 73.4 million). Overall, a total of EUR 141 million was invested in the KfW Capital business sector in 2018.
KfW Capital can build on the successful preparatory work of KfW and the Federal Ministry for Economic Affairs and Energy (BMWi), which introduced the ERP VC Fund Investments programme three years ago. As of 1 January 2019, KfW Capital also took over KfW’s holdings in the three generations of the High-Tech Start-Up Fund and the coparion co-investment fund.
KfW Capital was founded based on the political will to strengthen venture and early growth financing in Germany. Studies demonstrate that this segment, in particular, needs to catch up. In terms of venture capital investments as a percentage of a country's GDP, Germany is below the European average. Yet, at the same time, a very promising number of dynamic start-ups and young, innovative technology companies have developed in Germany in recent years. As these companies grow, they need better access to capital in order to become competitive for the long term.
The spin-off of KfW’s investment business into a wholly-owned subsidiary enables KfW Capital to focus more strongly on equity investments. This also lends more visibility to the government's commitment to the German VC market and more adequately reflects the growing importance of venture capital for corporate financing. KfW Capital aims to use its visibility to facilitate access for more investors to the German and European VC markets. Dr Jörg Goschin and Alexander Thees lead the team, and KfW Capital is supervised by a six-member Supervisory Board, chaired by Dr Ingrid Hengster, member of KfW's Executive Board. The Deputy Chair is Dr Stefan Peiß, also a member of the Executive Board of KfW.
KfW Capital – structure and products
The information contained in this online Annual Report 2018 is based on KfW’s Financial Report 2018, which you can downloadhere. Should this online Annual Report 2018, despite the great care taken in preparation of its content, contain any contradictions or errors compared to the Financial Report, the KfW Financial Report 2018 takes priority.