The German government has ditched the idea to deploy pension assets to finance venture capital (VC) investments in the final version of a start-up strategy adopted yesterday.
The measures in the final version of the document, aiming at turning Germany and Europe into attractive locations for start-ups, did not include the plan to set up a minimum investment quota in VC funds for statutory and private pension schemes through a “capital stock”.
The plan was mentioned in the strategy draft proposed by the federal ministry for economic affairs and climate action.
Anne Christmann, who is responsible for the ministry for economic affairs and climate action for digital economy and start-ups, said: “We have now decided within the government that the question of the capital stock for pension schemes is simply an issue that needs to be clarified outside of the strategy.”
She added: “Our timeline for the strategy is to implement the measures in this legislative period.”
Steering pension assets towards investments in VC funds was considered to be one of the main measures to strengthen the financing of start-ups in the ministry’s draft.
Instead, the government’s start-up strategy now envisions opening up the VC market to institutional investors through a German Growth Fund – Wachstumsfonds Deutschland – a fund of funds for growth capital.
The government intends to draw capital of institutional investors by leveraging on the deliberations on Solvency II and the associated delegated legal act of the European Commission in order to make a better use of the potential for investments of large institutional investors, it added in the strategy.
It is pushing to unlock public and private investments worth a total of €30bn in VC funds with the start-up strategy, to finance projects in the fields of artificial intelligence, quantum technology, hydrogen, health, sustainable mobility, bioeconomy and circular economy, climate, energy and environmental technology.
The cabinet will support the Future Fund – Zukunfsfonds – and its financing facilities with €10bn.
The financing facilities of the Zukunftsfonds provide equity, debt and mezzanine capital for innovative start-ups in their early to late growth phase, via direct investment funds and indirectly via funds of funds and venture debt, according to the strategy.
The financing facilities include the DeepTech & Climate Fund to attract investments for high-tech companies in their growth phase; a fund set up using the High-Tech Gründerfonds (HTGF) platform; a public-private VC fund; the Venture Tech Growth Financing facility to provide capital in the form of so-called venture debt; and the German Future Fund-European Investment Fund Growth Facility.
Robert Habeck, minister for economic affairs and climate protection, said: “Especially in difficult times like these, projects looking at the future must be promoted. The government’s start-up strategy is therefore a very important signal.”
The minister of finance, Christian Lindner, added: “There is private capital for innovations. However, there aren’t often the right framework conditions for investments in start-ups to be successful. I want to improve financing options [and] we will [also] introduce the law Zukunftsfinanzierungsgesetz (Future Financing Act) to make it easier for start-ups to access capital markets and raise equity.”