Germany’s €1bn fund-of-funds has deployed more than 80% of its capital two years after its final closing — now the country is planning to fundraise for a second fund of a similar size.
The fund-of-funds, dubbed 'Growth Fund Germany', launched in 2023 to make more growth capital available to startups and to strengthen the country and wider Europe as a business location.
It forms a key part of the federal government’s Future Fund, announced in 2021 to bolster the local VC industry.
Many European governments have invested in the domestic VC ecosystem. Some, like France, allocate money to a national fund of funds run by Bpifrance. Others, especially governments in central and eastern Europe, use public money to encourage nascent local venture markets.
Germany’s first growth fund was funded primarily by private investors, which was deemed significant at the time for a country where mobilising private capital hasn’t always been the norm.
There are movements in other European countries to tap private capital to get more money flowing into VC. In May this year, 17 UK pension funds pledged to invest 50bn into VC and infrastructure projects by 2030.
Growth Fund Germany 1.0
So far, Germany’s Growth Fund has invested €825m into 41 VC firms which have collectively backed 360 startups, according to new figures from KfW Capital, a subsidiary of Germany’s state development bank and a major LP in European VC firms.
Some 39% of the VC firms are from the ICT sector, while 35% come from life sciences and 26% from sectors such as deep tech, industrial tech, climate tech and food tech,
In terms of stage, the fund has invested 54% of its capital into growth funds, 35% into early-stage funds and 11% into generalists.
“We see further attractive opportunities for rounding off the portfolio for the remaining one fifth of the investment sum, both at VC fund level and for direct co-invesments,” said Jörg Goschin, CEO of KfW Capital in a statement.
“Following the correction in valuations seen in the boom years of 2020 and 2021, now is a very good time for VC investments, and some very promising VC funds are in the fundraising phase.”
KfW Capital is already working on the design of Germany’s second growth fund, with fundraising set to begin in 2026, though no official target fund size has been communicated.
The plan is to target domestic and international investors, particularly insurance companies, foundations, family offices, superannuation funds and pension funds to invest in the growth fund.
