Start-up campaign: KfW and German Federal Government launch debt financing for innovative companies in the growth phase
Press Release from 2019-03-27 / Group, Domestic Promotion
Joint Press Release
- New loan programme for debt financing of young technology-driven growth companies
- KfW provides a total of EUR 50 million annually for joint financing with private lenders
- In the first five years, the German Federal Government will assume 95% hedging of the resulting risks
Within the scope of the “Tech Growth Fund Initiative”, KfW and the German Federal Government are expanding the range of growth financing on offer in Germany with a new financing instrument: KfW's Venture Tech Growth Financing programme now provides loans to technologically innovative and rapidly growing companies with a resilient and promising business model to finance their further growth. KfW provides a total of EUR 50 million every year under the programme, which is set to run for at least five years. In the first five years, 95% of the resulting risks will be hedged by the federal budget. The new loan programme, as an integral part of the start-up campaign, augments the equity business of the subsidiary KfW Capital, which was established in autumn 2018 and focuses on fund investments.
Dr Ulrich Nussbaum, State Secretary at the Federal Ministry for Economic Affairs and Energy: “With their products and services, innovative growth companies contribute to Germany's standing as a strong business location and ensure the future viability of the social market economy.” As part of the start-up campaign, Federal Minister Altmaier has announced that more venture capital will be made available for start-ups. This is now happening with the kick-off of the KfW “Venture Tech Growth Financing” programme. Our hope is that this will stimulate the venture debt market, which is still very weak in Germany. This market segment is an important building block in a functioning venture capital market and ensures that sufficient financing is available to innovative companies at all stages of their development.”
Dr Jörg Kukies, State Secretary at the German Federal Ministry of Finance: young, innovative companies that can grow successfully contribute to preserving our competitiveness and securing high-quality jobs in Germany. Our aim is to ensure that they have sufficient capital at their disposal in all phases of their development. The German Federal Government has already helped to strengthen the venture capital market through numerous measures. However, there is still a lack of sufficient financing capital in Germany, especially in the growth phase. This also includes venture debt – a bridge between venture capital financing and traditional bank financing, which is gaining importance. With the new Venture Tech Growth Financing programme, we will continue to develop this promising niche market in Germany together with private investors.
Ingrid Hengster, member of KfW's Executive Board responsible for KfW's domestic promotional business, says: “Innovative, high-growth technology companies still do not have enough growth capital available in Germany. This is not only true for equity capital, but also for a specific range of loans that companies can use to spark the last stage of their growth before break-even and which we now aim to strengthen with the new programme. We look forward to using our financing expertise to support the German Federal Government in broadening its range of financing products for growth financing in Germany. With our new programme, we are also sending a message to private investors to jointly develop the venture debt market in Germany with direct investments in the companies.”
The prerequisite for financing from the KfW Venture Tech Growth Financing programme is the involvement of a private lender as financing partner who generally contributes 50% of the financing on the same terms (“at an equal pace”). Moreover, private venture capitalists must already have a stake in the company. The funds are made available directly to the company at market conditions. Contrary to the new KfW loan programme, the subsidiary KfW Capital focuses on equity participation in venture capital and venture debt funds.