German VCs push for €15B annual boost to fund domestic startups

German venture capital leaders are urging institutional investors to channel more domestic capital into startups, warning that heavy reliance on foreign funding could weaken the country’s economic influence and technological edge.

The GVGF, which includes over 20 venture and growth funds with €28 billion in combined assets, has proposed measures to increase domestic investment. According to their estimates, Germany’s pension funds, insurers, and foundations—collectively managing trillions in assets—currently favor traditional investments like bonds and real estate, which have yielded modest returns in recent years. The Forum suggests that even a small shift in allocation toward venture capital could significantly expand funding for growth-stage companies.

Christian Nagel of Earlybird Venture Capital described the current situation as a missed opportunity. "Germany has the capacity to finance its own technology companies," he said, noting that domestic investors account for only a fraction of startup funding. The GVGF has outlined steps to encourage institutional participation, including policy changes and greater transparency around venture capital returns. Dr. Tanja Emmerling of High-Tech Gründerfonds suggested that Germany’s planned pension reforms could help, arguing that venture capital aligns with the need for long-term growth and returns.

The broader concern is whether Germany can nurture companies capable of competing globally. Benedikt von Schoeler of Vsquared Ventures emphasized that a strong investment climate depends on fostering new ventures, not just protecting existing ones. "A country’s economic future isn’t just about the companies it already has," he said. The GVGF has released a playbook aimed at bridging gaps between venture capitalists, institutional investors, and policymakers, focusing on removing obstacles to domestic funding.

The debate comes as other regions show momentum in tech investment. Recent data indicates that European funding has rebounded, with the UK accounting for a large share of recent deals. Meanwhile, cities like Bengaluru have become dominant hubs for startup capital in India, and European space tech startups have seen increased funding driven by defense and sovereignty priorities.

For Germany, the challenge is twofold. Redirecting institutional capital could reduce dependence on foreign investors, whose priorities may shift. It could also help scale companies in emerging sectors where Germany has struggled to produce global leaders. The GVGF’s playbook argues that venture capital, despite its risks, can offer strong long-term returns, potentially outperforming traditional assets in inflationary environments. However, convincing risk-averse institutions to embrace this shift will require more than policy adjustments—it may demand a cultural shift in how they view startup investment.

The outcome could influence Europe’s broader funding landscape. Success might encourage similar efforts elsewhere, while failure could leave Germany trailing in the competition to build the next generation of technology companies. For now, the conversation is underway, but the path forward remains uncertain.

Sources: tech.eu