New subsidiary KfW Capital: a boost to venture capital financing in Germany

• Joint initiative between Federal Ministry for Economic Affairs and Energy (BMWi), Federal Ministry of Finance and KfW to expand the markets for venture capital (VC) and venture debt (VD) in Germany
• KfW Capital doubles investment volume in VC and VD funds to EUR 200 million p.a. thanks to support from ERP Special Fund
• Goal: improved access to capital for young, innovative, fast-growing tech companies
• Dr Jörg Goschin and Alexander Thees are the Managing Directors at KfW Capital
• Start of operations: 15 October 2018

KfW Capital, KfW Group's latest subsidiary, has now been established and is due to launch operational activities on Monday, 15 October 2018. This achievement was announced in Berlin today by the German Federal Minister for Economic Affairs and Energy, Peter Altmaier, and Dr Ingrid Hengster, Member of the KfW Group Executive Board. Based in Frankfurt am Main, the new subsidiary's objective is to develop the VC and VD funding landscape in Germany and Europe, thus improving access to capital for young, innovative, fast-growing German tech companies in the start-up and growth phase. With support from the ERP Special Fund, KfW's current investment volume in VC and VD funds will be increased to an average of EUR 200 million p.a. by 2020. In its work, the new venture capital firm will build on the professional foundations already established by KfW and the German Federal Ministry for Economic Affairs and Energy. Since the ERP Venture Capital Fund Investment programme was launched in 2015, KfW has invested a total of EUR 265 million in 18 venture capital funds. In cooperation with the Federal Ministry for Economic Affairs and Energy, KfW also set up the large co-investment fund coparion in 2016. As well as continuing to invest in these funds, KfW Capital will also take over KfW's existing investments in the three generations of the High-Tech Start-up Fund.

Germany's Federal Minister for Economic Affairs and Energy, Peter Altmaier, explains: “We want more entrepreneurs in Germany. Compared to other countries around the world, we are still lagging behind slightly in the area of venture capital financing. The creation of KfW Capital is helping us to make a clear and important statement about the future of this field. With this new venture capital firm, KfW's expertise in the area of start-up promotion will be coupled with financial resources. With the support of the ERP Special Fund managed by the German Federal Ministry for Economic Affairs and Energy, this new venture will be a powerful force that generates important impetus for the German venture capital market.”

Dr Jörg Kukies, State Secretary at the German Ministry of Finance, says: “Venture capital plays a hugely important role in the creation and growth of young, innovative companies. Over the past few years, the German venture capital market has advanced – a development also due to numerous measures taken by the German Federal Government. As a new subsidiary, KfW Capital will bring KfW's investment business closer to the market, enabling activities to be expanded even further. This will make an important contribution to strengthening the venture capital and venture debt market over the long term.”

Dr Ingrid Hengster, Member of the KfW Group Executive Board says:
“KfW Capital will significantly reinforce the ecosystem for growth financing in Germany thanks to its independent structure and dedicated mandate. One of the objectives of our commitment is to tap into private capital in order to generally improve the range of venture capital options for young, innovative, fast-growing tech companies – a group that plays a hugely important role in our economy. With this new undertaking, we will be relying on the rich expertise and experience possessed by our outstanding pair of directors and their team of specialists.”

The company will be managed by two directors: one from a market-based background and the other from KfW. Dr Jörg Goschin and

Alexander Thees have already established a team of around 25 staff, created an organisational structure and implemented the most important processes ready for operations to start on 15 October 2018. Dr Jörg Goschin is an experienced investment professional who has worked for some well-known international banks, venture capital firms and funds, including Metzler, BNP and ALSTIN. Alexander Thees has been working at KfW Group since 1996 and has assumed a variety of management roles since 2002. He has experience in the business policy and operational sides of SME financing and structured financing activities.

As part of the “ERP VC Fund Finance” programme, KfW Capital will invest a maximum of 19.99% or EUR 25 million in German and Euro-pean VC and VD funds. One of the criteria applied by KfW Capital in its investment decisions is that the fund receiving the investment must then invest at least the same sum again in German tech companies. KfW Capital will invest in funds from across the entire industry, ranging from follow-on funds run by experienced fund management companies to first-time funds. The aim of this approach is to invigorate the market as a whole. KfW is transferring its current ERP VC fund investments to KfW Capital, along with its stakes in the High-Tech Start-Up Funds I, II and III and the co-investment fund coparion.

The creation of the subsidiary and the expansion of the investment business were based on an idea to significantly enhance the market for venture capital financing as a driving force for the German economy. The developments began with a resolution passed by the German Federal Parliament in March of last year, assigning KfW, the Federal Ministry for Economic Affairs and Energy, and the Federal Ministry of Finance with a mandate to take action. Following on from this, KfW's Board of Supervisory Directors passed a resolution in June of last year to allow a new subsidiary to be set up. The German growth financing segment currently has a shortfall of EUR 500 million to EUR 600 million per year.

Note:
Further information about KfW Capital is available at www.kfw-capital.de

Furthermore, you can also access a KfW Capital dossier at www.kfw.de/stories/index-enfrom today onwards. This dossier contains interviews with Minister Peter Altmaier from the Federal Ministry for Economic Affairs and Energy, Dr Hengster (responsible member of the KfW Group Executive Board), a joint interview with the two managing directors Dr Jörg Goschin and Alexander Thees, and a number of best practice cases.