German Federal Government and KfW conclude agreement to launch “RegioInnoGrowth” as a further component of the Future Fund

• Up to EUR 450 million in equity and equity-like financing for start-ups and innovative small and medium-sized enterprises
• RegioInnoGrowth enables regional and tailored refinancing through KfW’s cooperation with the promotional institutions of the federal states
• Federal Government assumes up to 70% of the risk; private investors can be involved

The Federal Government and KfW concluded a contract on 14 August 2023 to start RegioInnoGrowth. The aim of this new component of the Future Fund is primarily to use equity and equity-like funds to finance stronger growth for start-ups and small, innovative SMEs, which are generally not the focus of venture capital funds. The German Federal Government is thus implementing another measure mentioned in its start-up strategy to strengthen innovative companies and is complementing the promotion of future technologies under the Future Fund. The Federal Government is providing up to EUR 450 million from the Future Fund and the ERP Special Fund for this purpose. RegioInnoGrowth’s approach enables regionally tailored financing solutions through cooperation with the promotional institutions of the federal states. Companies can receive up to EUR 5 million each, which is granted in the form of mezzanine capital or subordinated loans, for example.

State Secretary at the Federal Ministry for Economic Affairs and Climate Action, Sven Giegold:

“With RegioInnoGrowth, we are promoting the innovation potential of start-ups and growth-oriented smaller SMEs. It benefits especially companies which otherwise have difficulties to access venture capital. The German Federal Government consistently implements its start-up strategy. By providing tailored financing offers, we are improving the framework conditions for start-ups and innovative companies in Germany.”

Parliamentary State Secretary of the Federal Ministry of Finance, Dr Florian Toncar:

“Germany is a country with many good ideas. With the RegioInnoGrowth agreement launched today, the Federal Government and KfW are offering targeted support for start-ups and innovative SMEs, which are otherwise not in the focus of traditional VC funds. Together with the promotional institutions of the federal states, we are providing regional incentives for growth and innovation. It is important to us to support founders also on a local scale. To this end, the Federal Government ist providing up to EUR 450 million from the Future Fund and the ERP Special Fund.”

Katharina Herrmann, Member of the KfW Executive Board:

“The transformation into a sustainable, innovative and resilient Germany is gathering pace. It is largely supported by start-ups and innovative medium-sized companies, which need a solid capital base for their further growth. RegioInnoGrowth adds an important building block to the financing landscape at federal level for innovative companies. Germany has a unique promotional system in which KfW and promotional institutions of the federal states with their regional expertise work closely together. This offers the ideal conditions for reinforcing the spirit of invention in Germany.”

The combination of KfW refinancing and structuring expertise as well as the market knowledge and sales strength of the promotional institutions of the federal states at local level makes it possible to develop financing instruments that precisely meet the needs of entrepreneurs. It is also possible to involve private investors such as business angels or family offices. The Federal Government assumes up to 70% of the risks, the remaining shares are borne by the federal states and, if applicable, private investors.

RegioInnoGrowth is thus building on the model of Pillar II of the German Federal Government’s coronavirus aid package for start-ups and medium-sized companies, which ended in mid-2022. The instrument was very successful with over 1,800 financing packages for start-ups and medium-sized enterprises with a KfW/federal share of around EUR 600 million.

The conclusion of the agreement between the Federal Government and KfW laid the foundation for the launch of the new RegioInnoGrowth product in Germany. The development of suitable promotional products is now being pushed forward intensively in the federal states in order to launch a regional offer for RegioInnoGrowth. KfW and the promotional institutions of the federal states will provide information on progress in due course.