Start-ups and technology companies are often financed by a high degree of equity. However, equity also represents an efficient method of business activity financing for companies from the classical industry sectors. In Germany, equity from public sources is available from a number of different investor channels.
Choosing appropriate public equity capital providers
Depending on a company’s growth phase status as well as its industry sector, different amounts of equity capital will be needed
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Start-ups are normally looking for seed financing for market entry. In this case, the selection of a venture capital provider is a suitable solution.
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Growing enterprises with a sound track record usually need higher amounts of capital in order to further expansions. MBGs (Mittelständische Beteiligungsgesellschaften/Public-Private Equity Companies) are in place to offer higher volumes of capital for expansion financing. So called “pitch events” are one way of getting in touch with venture capital companies.
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Enterprises in a later stage of development are often contacted directly by providers of equity capital looking for investment opportunities. They may also contact equity capital providers directly.
Public VC in the federal states
Venture capital companies (VC) in the federal states offer equity financing to young and innovative enterprises to support early stage development. These VCs act as subsidiaries of the development banks of the federal states and support companies actively by providing risk capital as well as management and industry knowledge for their further development.
The investment focus is on innovation and is mainly in industry sectors including ICT, life sciences, and new materials. Subject to the regulations of the individual venture capital company, financing volumes of up to EUR 10 million are achievable.
Public-private equity in the federal states
For established companies seeking to finance further growth, but for start-ups as well, Mittelständische Beteiligungsgesellschaften (MBGs - “Public-Private Equity Companies for Small and Medium-Sized Enterprises”) are available as financing partners in the federal states. As independent institutes, they are supported by the federal states.
MBGs operate primarily through silent participation through the provision of subordinated capital. They have no investment focus on special industry sectors.
An equity searching company can expect a financing volume of up to EUR 1 million. It is characteristic that the individual MBGs are only active in their respective federal state. They do not operate to maximize profits. A further advantage of financing by equity capital from the federal state MBGs for companies is that they have easier access to the financing network of the respective development bank. That is why they are an important instrument for the economic development policy of the federal states.
Further venture capital opportunities
ln North Rhine-Westphalia, support in the field of venture capital also is offered by the NRW.BANK and the Kapitalbeteiligungsgesellschaft NRW (KBG NRW). The range of support and programs refers to the company‘s growth phase and the sector of industry and conditions are negotiated on a case-by-case basis. For instance, the programs „win NRW.BANK Business Angels Initiative“, the „NRW.BANK.Venture Fonds“, NRW.SeedCap“ and „NRW. BANK.Mittelstandsfonds“ belong to this incentive spectrum.