How is the German government supporting tech startups?

Funding for technology startups in Germany have reached an all-time high, with companies like N26 and FlixMobility reaching over €500 million each. The German government is keen to support the technology world in Germany – they’ve recently launched a new funding plan aimed at increasing the amount of startups in the country. But are they doing enough? 

The new funding plan 

In November 2020 (after a gruelling, 17-hour budgetary meeting) the German government launched a new programme aimed at supporting startups in Germany, with an alleged focus on technology companies. The 2021 budget includes €2.4 billion provided by the KfW, Germany’s developmental bank and other channels. This money is exclusively for helping small or new companies scale up their activities and doesn’t stop after this year. In fact, the German government have committed to investing €10 billion by 2030. While this sounds like a lot of money in theory, when you consider how much N26 and FlixMobility raised it isn’t enough to provide proper funding to more than a few companies a year. 

Who is eligible for investment? 

Since the programme is aimed at new and small businesses, you’ll have to prove that you fit these criteria in order to receive government funding. If you’re a technology startup or small enterprise, you may be able to get something under the new scheme. However, it’s likely that you’ll only be eligible for one category, meaning that the funding doesn’t actually amount to much and you’ll need to also get investment elsewhere. 

What funding is available for technology companies? 

There are different types of grants, loans and incentives available for technology companies. Which ones you’re able to get will depend on:

·     What type of company you are, i.e. where do you fall within the technology sector?

·    How big your company is and how long you’ve been around for – are you a startup or small-to-medium enterprise (SME)?

·      How much funding you already have from private companies.

·      Whether you’ve already received government support for your business.

·      How well your business is doing and what your annual turnover is (if anything). 

Grants and incentives

Grants and incentives are available for certain projects to particular groups of people. If you’re looking to get out of unemployment by starting a business, you could be eligible for a startup grant from the Federal Employment Agency. These are tricky to get approved for because you have to have been unemployed for a certain amount of time and justify why you’re starting a business instead of getting back into work. There are also government-backed coaching programmes for brand new businesses, but again, these have strict eligibility criteria. 

Subsidised business costs 

If you’re not able to get a government grant or incentive, there are options for subsidised business costs. These include setting up an office in Germany or buying necessary work equipment. Unfortunately, these are only available for brand new companies and don’t usually cover the whole cost of your office or equipment, just a part of it.  

Public loans 

There are also plenty of public loans available for small and startup businesses. They are provided by ‘house banks,’ or financial companies instead of the government but still allow you to access lower interest rates than on the open market. You can find out which types of investment your company might be suitable for, as well as more information on public loans, on the Federal Ministry for Economic Affairs and Energy’s website

Investment advice 

If you’re unsure how your technology startup can benefit from investment funding, you can get advice from startup advisory services or the Economic Affairs Ministry’s finance experts. These include:

·      Tips about preparing for meetings with your bank about a loan.

·      Advice on which promotional schemes are available to your company.

·      Information on funding for new startups and members of professional bodies.

·      Help for new or small business owners who are suffering from financial difficulty.

·      Expertise on the different types of finance available.

Learn more about how we can offer you expert investment advice and support you in getting funding for your tech company. 

Is there and specific government funding for the tech sector? 

There’s a new high-tech strategy which reserves a substantial amount of money in grants and incentives for research and development (R&D) companies. The aim of this is to support high-tech R&D projects and includes non-refundable grants for startups and SMEs. Aside from this, there are unfortunately no government grants that are specifically aimed at the technology sector. A lot more needs to be done in order for the German government to be able to say they’re focusing on tech startups. 

Are the German government doing enough? 

Despite the pledged €2.4 billion budget for new and small company funding, we don’t believe the German government are doing enough. This money isn’t properly accessible because there are such strict criteria for the different grants. If Germany wants to catch up with countries like Japan and the USA, which invest billions into startups every year, we need to do a lot more. Otherwise, we’ll find that our entrepreneurs try to relocate their businesses to countries that are more supportive. 

How can we help? 

We teach companies how to increase the likelihood of getting investment and decide on the best funding option for your business. Our mission is to help you get investment for your company – get in touch with us to learn more about our services.

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