Stefan Wintels, the CEO of German state bank KfW, is — like his peers at other public banks and funds in Europe — on a mission to get more private capital behind his country’s high growth tech businesses.
“We currently have €10bn of venture capital investments in Germany per year more or less, but we need at least €30bn per year invested into the ecosystem in order to close the gap in relative terms to the US. That should be our target,” he says.
Wintels — who spent 20 years in various leadership positions at Citigroup before joining KfW as CEO in 2021 — says Germany’s VC ecosystem remains “underdeveloped,” with insufficient private capital flowing into the industry.
Institutional investors, like pension funds and insurance companies, remain wary of investing in ‘risky’ venture capital, limiting how much capital is available for later-stage high-tech startups. A 2023 analysis by Redstone VC found that German pension and retirement funds represent less than 1% of the investor base in German VC funds. In comparison, US pension funds represent about 27% of the investor base in US VC funds and about 15% of the capital in German VC funds.
“We are highly dependent on US institutional money and there’s a high risk that we’ll lose these companies to the US,” says Wintels.
“If you look at the distribution of assets in Germany, it’s heavily geared towards real estate and savings. There is clearly an opportunity for institutional investors to reallocate more money into the stock market and private credits, including venture capital and also private equity.”
Getting private capital into VC
Getting private capital sources to reallocate their money into venture capital is a difficult task — but it’s one that Wintels is willing to take on.
Germany’s ‘Win-initiative’, unveiled in September last year, is a good step in the right direction, he says. The initiative — inspired by France’s Tibi initiative — hopes to invest €25bn of public and private capital into the startup ecosystem by 2030.
So far, corporations including Deutsche Bank, Allianz and Deutsche Telekom, insurance companies such as HUK Coburg, alongside KfW, have signed a declaration of intent to contribute to the initiative.
KfW has (vaguely) outlined what the money will be spent on in a 10-point plan, which includes measures like the creation of a secondary market for VC funds, financing solutions for first-of-a-kind technology and ‘know-how transfer’ to introduce new investors to the VC asset class — but the details haven’t yet been ironed out.
Wintels is unable to share yet how much money has been committed to the initiative so far, or give details on what measures have been taken. KfW expects a report on the progress of the initiative to be published in the first half of 2026.
The Win-initiative has been a good conversation-starter to get largely untapped private capital sources — such as foundations, corporates, small and mid-sized pension funds and insurance companies — to invest in VC, adds Wintels, but a mindset change is still needed among investors.
“We need education. We need a cultural change, and quite frankly, we need better data to demonstrate that the risk-return profile of venture capital is very competitive,” he says.
“I think I see the beginning of this mindset change among private investors in Germany. But we should be honest that this is a long-term journey. This does not happen overnight.”
The role of the state
Bolstering Germany’s startup ecosystem is currently a “huge focus” for the German government, says Wintels, because “people have understood that a competitive VC ecosystem is important for economic growth, for innovation, and hence long-term competitiveness and well-paid jobs.”
In its 146-page coalition agreement published in April, the government announced several new initiatives for the tech sector. It pledged to double the size of the Win-initiative, which was originally aiming to raise €12bn. This was the first time a public-private initiative to develop the ecosystem explicitly got a mention in the coalition agreement, says Wintels.
The government also proposed creating a new €100bn “Germany Fund” — a fund-of-funds to invest in startups and address the funding gap at the growth stage. The idea is for the government to contribute at least €10bn in federal funding and scale this to €100bn by 2030 by mobilising private capital.
The details and timeline are yet to be worked out.
Strengthening IPOs
Also on the government’s radar: the IPO market.
Europe has several stock exchanges instead of one market, leading to less liquidity and lower valuations making it less attractive for high-growth companies than US markets, says Wintels.
He thinks developing a single capital market across EU member states is “a very intellectually attractive and compelling idea.”
“Investors love size and liquidity — that’s the main driver, and therefore European capital markets should provide both.”
He adds that the US has a higher supply of “risk capital” referring both to capital to finance young growth companies and the capital of investors who buy newly placed shares on the stock exchange. “Hence from my perspective, the top priority is to increase the supply of risk capital in Europe.”
To address this, Europe needs to reform its pension systems and adjust regulations to allow institutional investors greater allocation into high-growth segments, says Wintels.
Institutional investors from overseas are often faced with complex regulatory requirements and high costs for transparency and reporting obligations. Making things easier and less costly could make investing in Europe more attractive.
Wintels points to Sweden as an example of how government actions can help to develop a robust public market.
The country is the EU leader in IPOs. Between 2016 and 2023, Sweden recorded 508 IPOs compared to 450 in France, Italy and Germany combined, according to data from the German Stock Institute.
Important measures that Sweden implemented include a mandatory capital market-covered pension scheme. Swedish households have one of the highest levels of capital market participation in Europe, with roughly 10% of their financial assets invested in investment funds and around 7% in listed equities, according to recent OECD data.
That hasn’t stopped some of the country’s most prominent tech companies such as Klarna from choosing to list in the US instead of their home market.
Germany, and Europe have homework to do — but Wintels is optimistic that “big steps forward” can be made in the next 10 years.
In May, he spoke at Wirtschaftstag (Economic Day), an annual business and political conference in Germany, where Deutsche Bank CEO Christian Sewing, and various politicians including Germany’s new minister for Economy and Energy Katherina Reiche made an appearance this year.
“I felt over the two days that there is a desire to make Germany economically stronger. There’s a desire for more economic integration in Europe, and there’s a desire to enhance our overall resilience,” says Wintels. “And that, from my perspective, is a very positive agenda, a positive outlook too — and a clear signal to our European partners.”
Read the orginal article: https://sifted.eu/articles/germany-plan-30bn-vc/
