Public authorities support startups with countless financing and funding instruments. Which program is suitable for which startup? We have compiled the most important information.
To succeed, startups must offer something new or significantly improve existing offerings—in other words, they must work in the market. To achieve the desired proof-of-concept, capital is first and foremost needed. However, private investors often shy away from the risk of investing money in an unproven business model. And even when the company is already operating successfully, some enterprises struggle to acquire the growth capital they urgently need. In internationally competitive business fields, however, delayed growth can result in falling behind the competition.
This is where public authorities come in: The federal government, states, and municipalities support startups where private VC market financing falls short. In addition to competitions that promise prize money and prestige, support consists primarily of grants, loans, guarantees, and equity participations.
Before company founding
The various funding programs are each aimed at companies in different founding phases. Financial support is particularly important at the beginning of the founding process—after all, operating business income is still far off. For founding teams from academia and (former) university graduates in the founding preparation phase (pre-seed stage), EXIST provides funds. Among other things, the Munich startup FAZUA benefited from EXIST support. Co-founder Marcus Schlüter told us in an interview:
“Without the EXIST grant, we wouldn’t exist today.”
The business plan competitions from BayStartUP have also been a great help to countless startups in the pre-seed phase: participation is free, with individual consulting on business plan development and prize money available.
Seed and growth stage: Wide range of financing options
In the seed phase, a startup must prove that the world has been waiting for its product. Of course, liquid funds are necessary for product development, prototype building, and company launch. To avoid financial hardship during the transition from pre-seed to seed phase, the search for follow-on financing should begin in good time—roughly six to eight months in advance.
Smaller silent participations up to €50,000 are provided by the Mikromezzaninfonds Deutschland. The advantage: founders receiving funding do not have to give up shares—the company remains in their hands.
If you’re looking for something bigger, the High-Tech Gründerfonds (HTGF) is a good first port of call. Since 2005, 450 companies have received financing from HTGF.
The INVEST program subsidizes business angels and other private investors when they participate in startups. Young companies must first obtain certification of eligibility for funding. Afterwards, they can register in a directory of the Business Angels Network Germany.
For startups that want to grow quickly and have their sights set on the American market, the German Accelerator offers start-up support. In two separate programs, the program brings life science startups to Cambridge, Massachusetts, home of Harvard University and MIT, and tech startups to Silicon Valley, San Francisco, and New York. Young companies are networked with mentors, investors, and customers on site. Currently, Icaros is participating in the German Accelerator in Silicon Valley.
For financing innovative tech startups, the co-investment fund coparion can also be of interest. The fund invests up to ten million euros per company—provided that private investors participate with at least the same volume on the same terms.
Promotional loans can also be an interesting option. Mediated through the house bank, KfW offers companies reduced interest rates and other favorable options. The LfA Förderbank Bayern also offers loans for founding and growth financing.
An important contact point is also the European Investment Fund. Similar to INVEST, it promotes investments through business angels via the European Angels Fund (EAF) and offers a range of other financing instruments for startups in both the seed and growth phases. These include the ERP/EIF umbrella fund, ERP VC fund investments, and the ERP/EIF growth facility.
Further information is available in a special edition of the magazine Gründerzeiten and a funding guide contained therein. A good overview of funding options is also provided by the funding database of the Federal Ministry for Economic Affairs.
