Venture capital – project of the Federal Ministry for Economic Affairs and Climate Protection for a start-up strategy of the traffic light coalition


Startups are finally getting the attention they deserve: On 1 June 2022 and for the first time, the German government is presenting goals and measures for a comprehensive start-up strategy. The details still require precise wording and legislative implementation. Early voices welcome the holistic approach to making Germany and Europe a stronger start-up location. The draft of this strategy document is available here (German language only).

Relevance of startups

Germany is a strong economic place. However, the main pillars are industry and small and medium enterprises, not start-ups. Nevertheless, the German government recognizes that start-ups are of great importance for the German economy. At the same time, the government is broadening its vision and emphasizing the relevance for society in general and ecology in particular: for example, almost a third of all start-ups are active in the field of environmental protection. climate and the environment, and thus also make a significant contribution to the sustainable transformation of the German economy.

According to the government document, start-ups are generators of ideas and drivers of innovation and therefore create momentum, renewal and transformation. Thus, they are materially important to promote.

Goals

The main objectives of the start-up strategy are ambitious and have been named as follows:

  1. strengthen the financing of start-ups,
  2. facilitate the attraction of talent by start-ups – make employee participation more attractive,
  3. ignite start-up spirit – make start-ups easier and more digital,
  4. strengthen women start-up founders and diversity,
  5. facilitate spin-offs of start-ups from science and universities,
  6. improve the framework conditions for start-ups of public utility,
  7. mobilize the skills of start-ups for public procurement,
  8. facilitate access to data for start-ups,
  9. strengthen real-labs – facilitate access for start-ups and
  10. a general focus on start-ups.

Implementation of the Start-up-Strategy in a Nutshell

At present, it is difficult for new German start-ups with rapid growth and huge capital needs to raise sufficient funds – loans are hardly an option. For this reason, funding is provided by government support programs and specialized public and private investors. This is where the start-up strategy essentially comes into play. In summary, start-up financing – in addition to many other measures – should be conducted through the following steps:

  • Among other things, the German government will use the future fund and its individual modules to support innovative technology-focused start-ups in the growth phase and will provide 10 billion euros in new public funding over an investment period of up to in 2030.
  • In addition, the INVEST program should be relaunched to further and sustainably stimulate the business angel market in Germany. The effective date of a new INVEST funding guideline is scheduled for January 1, 2023.
  • The conditions for initial public offering (IPO) must be reviewed, simplified and modernized.
  • The sales tax exemption for venture capital funds should be implemented.
  • Establishment of social capital in statutory and private pension schemes as well as a minimum investment quota in venture capital funds.

In addition, given the tense situation of candidates on the labor market, the following priority measures are planned to attract more talent:

  • Further development of the “skilled labor strategy” (Fachkräftestrategie) to simplify and accelerate the immigration of skilled workers from foreign countries, in particular by anchoring the professional and university degrees of foreign skilled workers and by simplifying administrative procedures.
  • Improving income tax law in the context of employee participation.
  • Simplify the accessibility of “remote work”.

In addition, a simplified “foundation” must be ensured with a digital (notarized) foundation deed for the establishment of German limited liability companies (GmbH).

In order to increase diversity, female founders should receive targeted support, for example through a new funding line “EXIST Women” or targeted funding from diverse and female venture capital funds.

In addition, many priority measures aim to (i) facilitate scientific and university spin-offs, (ii) improve the framework conditions for start-ups in the public interest, (iii) mobilize the skills of start-ups for the markets (iv) facilitate start-ups’ access to data, (v) strengthen real-labs, in particular by creating (new) experimentation clauses, and (vi) centralize the start-up ecosystem thanks to to targeted networking.

Outlook

The general naming of the objectives shows that many measures will still be characterized by great dynamism and that there is still a lot of “flow” here.

It remains to be seen whether the start-up-strategy – still planned for this summer – will finally be adopted by the traffic light government. Then there should be more clarity on the exact legislative implementation.

Overall, the federal government is pursuing a holistic approach and will implement the strategy – starting now – in the form of packaged measures during the current legislature. Annual monitoring of the development of Germany as a start-up site is also planned. We will continue to watch the development of the startup strategy with interest and look forward to its implementation.

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