KfW to substantially expand its activities in the field of equity finance

• Move is to strengthen Germany as a location for start-ups and fast-growing innovative technology firms
• Planned investment volume of EUR 2 billion over the next 10 years
• Subsidiary is scheduled to be founded in early 2018 and commence operations in the middle of the year

Frankfurt am Main, 03-Jul-2017 — /EuropaWire/ — In the years ahead, KfW will substantially expand its activities in the field of equity finance. For this purpose it will create a subsidiary of its own at the beginning of 2018. KfW’s Board of Supervisory Directors approved the joint initiative of the German Federal Ministry of Economic Affairs and Energy (BMWi), the Federal Ministry of Finance (BMF) and KfW at its 29 June 2017 meeting. The new subsidiary will combine and expand KfW’s venture capital (VC) financing activities in the future.

The new company will aim to improve the venture capital offering for innovative technology-oriented enterprises in the start-up phase and in the particularly capital-intensive early growth phase. Enterprises in Germany currently cannot access enough capital particularly during the phase in which they want to tap into new markets and expand. The shortage of capital in the start-up phase and of follow-up and growth finance in the early growth stage is currently estimated at around EUR 500-600 million per annum.

Matthias Machnig, State Secretary in the Federal Ministry of Economic Affairs and Energy, commented: ‘By approving the launch of its subsidiary, KfW has today taken the crucial step of realigning its equity finance business and making it more marketable. This is an important contribution to our goal of doubling the venture capital volume in Germany in the years ahead. To achieve this we must close the existing financing gap so that start-ups can receive the necessary capital to grow and assert themselves in the market.’

The Parliamentary State Secretary in the Federal Ministry of Finance, Jens Spahn, emphasised: ‘We are working hard to bring Germany into the digital future. KfW’s new offering will further improve financing conditions for start-ups. We are systematically tackling the shortage of follow-up and growth finance. Funds can now reach businesses faster, using market processes, and with more start-up expertise.’

Dr Ingrid Hengster, Member of KfW’s Executive Board, said: ‘Germany now has a noteworthy and diverse start-up scene. However, many of these innovative firms still have financing problems. This can cause them to delay or even abandon important growth investments. If we want to change this we need a financing landscape that actively supports businesses even when they are growing strongly. By creating the subsidiary we will be putting our equity finance activities together under a single roof and creating the conditions for further strengthening the ecosystem for growth finance Germany.’

The new KfW subsidiary will focus on investments in venture capital funds. These funds, for their part, will invest in young technology-oriented businesses in Germany to strengthen their capital base. Investments in what are referred to as venture debt funds will also be possible. These funds provide businesses with borrowed capital to finance their risky expansion phase. In future the new subsidiary will conduct KfW’s business in the field of venture capital. This will include its involvement in the High-Tech Start-up Fund, the venture capital fund coparion which was established in 2016, and its participation in the ‘ERP Venture Capital Funds Investments’ programme, an exposure of the ERP Special Fund. The subsidiary is expected to increase its annual investment volume to EUR 200 million by the year 2020 and thus provide growth-oriented high-tech firms with some EUR 2 billion in the next ten years.

The subsidiary’s management board will have one expert from the market and one from KfW. It will commence operations in mid-2018.

SOURCE: KfW

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