Venture Capital — Quo Vadis? How can you get involved as a business angel?

Originally, the term venture capital was used to cover everything that included private equity and venture capital in the USA. Today, venture capital (VC) in Germany is understood to mean the financing of young, non-listed, technology-oriented companies in the early and growth stages through off-market equity capital.

Where does early-stage technology financing stand in Germany today?

Although it has been possible to observe a significant increase in start-up activity for some years now following the disillusionment of 2001-2005, start-up teams are often still uncertain when it comes to the question of sufficient financing options. And indeed, funding from High-Tech Gründerfonds and Bayernkapital alone is not enough to promote innovation across the board.

VC funds today typically need to invest at least EUR 2-5 million per target given their fund sizes, so all investments with sizes between EUR 0.5-1 million need to be facilitated by business angels in cooperation with government co-investors.

In addition to capital, business angels also bring their personal know-how. Unlike VC funds, they are independent of specific investment rules. They often invest either together with other business angels or in addition to public investors (co-investments). Public support for business angels through the instrument of the venture capital investment grant, as well as broader support for active business angels through the European Angels Fund, which is, after all, also fed by German taxpayers' money, is very helpful here. Business angels and VC funds ("investors") generally provide capital for an unlimited period of time and invest with a long-term investment horizon, and always only with freely available and unleveraged capital. The aim of an investment is always to achieve the highest possible enterprise value and thus for the investors to make a profit on exit.

What characteristics does a startup need to have in order to qualify for funding?