The governing coalition wants to support startups with a new KfW fund and higher tax allowances for employee share ownership. The German Startups Association draws mixed conclusions about the coalition's decision.
Last Sunday, the governing coalition met in Berlin and had the media attention on its side. Late in the afternoon, white smoke rose above the Chancellery: We have reached an agreement on employee share ownership and a venture capital fund for future technologies.
Coalition decision also affects startups
Didn't notice? Don't worry, the settled dispute over the basic pension was indeed the focus of the coalition and the public. Two decisions by the governing parties that could directly affect startups received little attention. The last two points of the three-page resolution document state succinctly:
„Employee share ownership contribute to employees' wealth creation. To increase their attractiveness, the tax-free maximum amount will be increased from the current €360 to €720."
as well as
“The coalition committee agrees to propose a Investment fund for future technologies particularly in the areas of digitalization and climate technologies, with a volume of up to 10 billion euros.”
Easier recruitment and more money for startups
Equity investments are a popular way for startups to attract and retain employees. Innovative young companies often cannot compete with the larger companies when it comes to salaries. Especially in Munich, with its seven DAX 30 companiesWith eleven companies listed on the MDAX and countless medium-sized enterprises, competition for skilled workers is fierce. Startups can leverage their growth opportunities in the battle for the best minds by allowing their employees to participate in the company's success.
A new KfWThe fund, through which the state development bank invests in innovative digital companies, is intended to pump urgently needed money into the German startup economy. To have a chance of competing with the startup ecosystems in California, London, and Tel Aviv—not to mention the billions of state funding in China—German startups need growth capital.
“The grand coalition’s proposal completely ignores the urgent needs of startups”
The German Startups Association (Bundesverband Deutsche Startups) has mixed views on the coalition decision. The startup association generally welcomes the KfW investment fund, but states that "details, such as the investment period or the planned leverage and mobilization of private capital for venture capital investments within the framework of this investment fund, are crucial for a final assessment."
Stricter is possible Florian Nöll, Chairman of the Association, with the agreement on employee share ownership:
“The grand coalition’s proposal to increase the tax allowance for employee share ownership, on the other hand, completely ignores the urgent needs of startups in this area.”
According to the association, many problems such as the timing of taxation and the competitiveness of taxation in an international context would not be addressed by increasing the tax allowance.
