Germany's Audacious Strategy: Upping Venture Capital Investments to €30bn by Engaging Private Capital

Germany has a daring vision: a threefold increase in its annual venture capital (VC) investments, from the current €10bn to €30bn. The top executive at the German state bank KfW, Stefan Wintels, is keener than anyone to see this ambitious target achieved. His blueprint? Put private capital at the heart of the propulsion engine.

Wintels, a seasoned banking veteran with two decades of leadership experience at Citigroup before joining KfW, acknowledges that his home country’s venture capital ecosystem is still underdeveloped. This is in part due to an insufficient influx of private capital into the industry.

However, the hurdle emanates from inherent reticence among institutional investors such as pension funds and insurance companies. Deemed ‘risky’, venture capital often falls short of attracting significant investment, thereby limiting available capital for promising, high-tech, late-stage startups.

In light of this, Wintels envisions a strategic reconfiguration of the German investment landscape. With a predominant lean towards real estate and savings, the German distribution of assets could potentially accommodate larger allocations to venture capital and private equity.

Efforts to steer private capital towards venture capital are already underway. Launched in September last year, ‘Win-initiative,’ mirrors France’s Tibi initiative. It intends to inject €25bn of both public and private capital into the startup ecosystem by 2030. Key corporations have already committed to this goal, including Deutsche Bank, Allianz, and Deutsche Telekom, along with insurance companies such as HUK Coburg, and KfW itself.

Despite significant progress, an investor mindset change is essential. Wintels maintains that ‘better data’ demonstrating the competitiveness of the risk-return profile of venture capital, along with education and cultural change, are critical to this transformation.

This capital expansion is a large part of the German government’s focus, viewing a vigorous VC ecosystem as a linchpin for maintaining economic growth, innovation, and creating well-paying jobs. A long-term journey, admittedly, but one that Germany is committed to traversing. There’s more than a glimmer of hope that a fresh infusion of private investment will supercharge the nation’s venture capital bets.