Growth Fund Germany (Wachstumsfonds Deutschland)

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Growth Fund Germany is a €1B public-private fund of funds designed to close growth-stage venture capital gaps for startups and technology firms, enhancing Germany’s innovation ecosystem.
What are the main aims and objectives?

Growth Fund Germany aims to transform Germany and Europe into globally competitive hubs for entrepreneurship by targeting the persistent shortage of later-stage venture capital available to startups and growth-oriented tech firms. Policymakers cite the “growth gap” as a key barrier, with promising companies seeking financing abroad due to limited domestic options. By blending public and private capital in a fund-of-funds model, the program intends to mobilize institutional investment, increase startup job creation, and drive sustainable economic expansion. The fund’s objectives are:

  • Mobilise at least €1B in growth financing for startups.
  • Attract participation from major insurers, pension funds, asset managers, and family offices.
  • Improve retention of high-potential firms.
  • Strengthen Germany’s position as a leader in deep tech and digital innovation.
  • Develop a professional and resilient VC ecosystem supporting long-term growth.
How does the program work?

Growth Fund Germany (Wachstumsfonds) is structured as a dual-compartment fund of funds. The first compartment caters to private institutional investors with a market-standard risk/return profile. The second includes public anchors—German Federal Government, KfW Capital, and the European Investment Fund—to boost confidence and absorb certain risks.

Capital is invested indirectly in German and European venture capital funds, not in startups directly. KfW Capital acts as investment advisor, reviewing hundreds of VC funds and recommending investments based on rigorous selection criteria. Universal Investment Group administers the fund, and Clifford Chance provides legal support. The German Insurance Association (GDV) helped design the fund to meet strict investment and regulatory needs.

The core mechanisms are:

  • Pooling resources from over 20 institutional investors.
  • Providing VC funds with large-scale capital to support growth-stage tech companies.
  • Offering downside protection and risk buffers to attract cautious private investors.
  • Focusing fund investments on key sectors: climate tech, digital innovation, industrial automation, and health.
  • Deploying capital rapidly after closing to impact the ecosystem immediately.

Eligibility for direct support is indirect: startups benefit if supported by VC funds receiving capital from Growth Fund Germany. The program began making investments after its closing in 2023.

What is the overall cost?

Total program cost: €1B at launch.
Funding sources: Mostly private capital (from insurers, pension funds, etc.) alongside anchor investments from the Federal Government and KfW Capital. No startup fees.
No direct budget impact from tax expenditures.

How was it implemented?

Growth Fund Germany was envisioned as a core component of Germany’s national “Future Fund” (Zukunftsfonds), with the strategic goal of closing late-stage venture financing gaps and boosting Germany’s attractiveness for tech entrepreneurship. The initiative was led by the Federal Ministry for Economic Affairs and Climate Action (BMWK), with KfW Capital—a government-backed investment arm—serving as both an investment intermediary and investment advisor. Universal Investment Group took on the role of the fund manager, responsible for fund administration. Legal support was provided by Clifford Chance, and BNP Paribas Securities Services acted as custodian. The German Insurance Association (GDV) and several major insurers also played a significant advisory and structuring role from the outset.

Implementation involved the development of an innovative parallel fund structure. This dual-compartment design allowed the fund to accommodate different risk-return expectations among investor groups, helping to secure the participation of more than 20 institutional investors. These included large insurance firms (such as Allianz, Debeka, Generali Deutschland AG), pension funds, superannuation funds, foundations, asset managers, and family offices. Anchor investments were committed by KfW Capital and the German Federal Government.

Key phases and milestones:

  • 2022: The legal and management framework was finalized. This phase involved resolving regulatory requirements and defining the fund's terms to meet investor needs and compliance standards.
  • Mid-December 2022: The fund held its first closing. After this point, Growth Fund Germany began investment activity, a common practice in private equity and venture capital, where funds are deployed while fund-raising continues.
  • November 2023: The fund held its final closing, reaching its €1 billion target volume. At this stage, all institutional partners had joined and the fund structure was complete, marking one of the largest-ever venture capital funds of funds in Europe.
  • 2023–2024: The fund rapidly allocated capital, with more than half the target volume (€567 million) committed to 29 target venture capital funds by November 2024. Main sectors for investment were information and communication technology (ICT) and life sciences, with additional focus areas in deep tech, industrial tech, climate tech, and food tech.

Throughout the implementation, KfW Capital managed investment selection and portfolio building, emphasizing risk/return diversification. Universal Investment was responsible for operational fund oversight and reporting. Regular public updates and progress reports by BMWK and KfW Capital have tracked fund milestones and capital commitments.

What impact has been measured?

By mid-November 2023, more than €260 million had already been allocated to 16 VC funds. As of 30 November 2024, the fund had deployed over €567 million to 29 target VC funds, exceeding half its total volume in roughly one year.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom