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Venture capital

The term venture capital (also known as risk or equity capital) refers to the financial support for high-risk business start-ups. It is when equity capital is introduced for a limited period of time.

The capital provider concludes the investment based on rates of return. After some three to eight years, the capital provider usually steps away from the business by selling their investment shareholding. Venture capital is available as finance in the early stage of the business’s development as well as in the growth phase.

Tip: Types of capital providers

Venture capital can be an interesting option for start-up financing and is offered by: Business Angels, venture capital investment companies and medium-sized capital companies

As the market for venture capital in Germany remains underdeveloped, both regional and national governments have developed offers appropriate for supporting the financing of innovative and technology-based start-ups. A selection of interesting offers by public capital companies includes:

High-Tech Gründerfonds

Since 2005, High-Tech Gründerfonds has been financing young technology businesses on attractive financial terms and the management team provides active support with its strong network and business expertise. Together with its partners, High-Tech Gründerfonds places significant emphasis on early-stage financing. Requirements are an innovative technological basis and a promising market situation. Further information is available at: www.high-tech-gruenderfonds.de

NRW.BANK

NRW.SeedCap Digitale Wirtschaft

The NRW.SeedCap Digitale Wirtschaft will be of interest to small and medium-sized businesses in North Rhine Westphalia that are part of the digital economy and that are in the initial phase of business, having been established for no more than 18 months. Finance is provided for operating resources and investments that promote digitisation, such as the development of digital infrastructures, software and media, business models that increase efficiency through digital technologies and products and services that have only been made possible by digitisation. www.nrwbank.de/seedcapdw

NRW.BANK.Seed Fonds

The NRW.BANK Seed Fonds are regional funds available for businesses in North Rhine Westphalia that are in the initial phase of becoming established. Each of these funds has around 10 million euros available. The Seed Fonds are capitalised up to a maximum of 49 percent by the NRW.BANK, the remaining 51 percent is provided by private and credit institutions from the respective regions. The Seed Fonds provide support in particular for technology-based businesses that have a high degree of innovative capacity and growth potential. www.nrwbank.de/seedfonds

NRW.BANK.Kreativwirtschaftsfonds

Through the NRW.BANK.Kreativwirtschaftsfonds, the NRW.BANK participates, in the form of mezzanine or equity capital, in helping businesses with new ideas on significant growth. The focus is on businesses with a clear competitive advantage, compared with existing structures in a large market, to set up and establish a profitable business in the long term. www.nrwbank.de/kreativwirtschaftsfonds

win NRW.BANK Business Angels Initiative

The win NRW.BANK Business Angels Initiative gives private equity capital to innovative businesses. The capital comes largely from successful business people, managers and business professionals, known as Business Angels. www.win-nrw.de

Kapitalbeteiligungsgesellschaft NRW (KBG)

Mikromezzaninfonds-Deutschland

In 2013, the Federal Ministry for Economic Affairs and Energy set up a micro-mezzanine fund with EUR 35 million. The fund offers start-ups, as well as small and young businesses, equity up to EUR 50,000 for a period of 10 years. The funds can be used for any business financing project. It can be combined with other forms of credit up to an overall financial requirement of EUR 300,000. An application form and further information is available at: www.kbg-nrw.de/mikromezzaninfonds

Investments

The KBG also provides investments for start-ups, corporate succession and investments to expand or secure a business. In so doing, they adopt a role similar to that of a sleeping partner, whose approval is only required for particularly important business transactions, such as the inclusion of new partners or investments to third parties. The investment agreement is usually drawn up for a term of seven to ten years. Further information is available at: www.kbg-nrw.de/de/beteiligungen/grundlagen