Many young technology companies depend on venture capital. However, the necessary funds are often lacking due to the coronavirus crisis. Jörg Goschin and KfW Capital help cover the need for liquidity.
Dr Jörg Goschin is Senior Managing Director at KfW Capital together with Alexander Thees.
You provide initial assistance for …
… innovative technology companies on a growth path – both in economically good times and economically difficult times like the ones we are currently experiencing.
Please describe the situation in the start-up scene which is struggling with the impacts of coronavirus.
All start-ups have something in common: they rely on great amounts of commitment and enthusiasm to build efficient and effective business models out of their ideas. Due to the massive restrictions in the course of the lockdown, there are now start-ups that need extra liquidity because the development of their products and services was delayed and important sales and sources of income have been lost. At the same time, they still have significant cost items for personnel and development. The German Federal Government provided aid amounting to two billion euros via two pillars in order to support these companies with liquidity.
The first pillar is called the Corona Matching Facility. How does it work?
Correct. Since mid-May, the so-called CMF has been available to start-ups that have private venture capital funds as investors. The venture capital funds can supplement their own funds to finance start-ups until 31 December 2020 through KfW Capital or the European Investment Fund on equal terms. The VC funds must first undergo a successful appraisal because they function as a trustee of the federal funds. We look forward to being able to support start-ups efficiently in this difficult situation through our proven cooperation with VC funds.
Which approach was chosen for the second pillar?
The second pillar is for start-ups and smaller companies that do not have access to the CMF and are financed by angel investors or other corporate partners, for example. Together with the Federal Ministry for Economic Affairs and Energy, the Federal Ministry of Finance and the promotional institutions of the federal states, KfW has developed very efficient ways to support these companies: KfW awards global leasing loans with liability waivers to the promotional institutions of the federal states, which in turn give start-ups tailor-made financing in the form of mezzanine capital or equity capital.
How have the two aid pillars been received?
The Corona Matching Facility was very well-received by the market from the beginning. Many applications came from funds in the portfolio of KfW Capital and the European Investment Fund, but also from completely new VC funds. Together with the second aid pillar, there is a very good package to help keep start-ups that create innovation and jobs from failing due to the coronavirus.
Which entrepreneurial decisions have you observed?
We have watched a series of start-ups adjust their business models very agilely to the new situation, right after the first few weeks.
Published on KfW Stories: 10 November 2020.