Five years after KfW Capital commenced operations as a "Responsible VC Fund Investor", we can look back on what was probably the most eventful year in our young history. To be sure, the preceding years were also characterised by very specific challenges, including the structuring and implementation of the coronavirus start-up aid programmes (2020) and the design, implementation, and coordination of the Federal Government's Future Fung (2021). But we significantly expand our activities yet again in 2023. We introduced new investment facilities to the VC market and held academies and training sessions on the further substantive development of the VC ecosystem. On behalf of the Federal Government, we launched the Wachstumsfonds Deutschland, our first VC fund of funds. In a very demanding environment, we reached the target volume of EUR 1 billion for this fund and succeeded in winning over new institutional investors for the venture capital asset class.
This is our retrospect, as we bid farewell to the year 2023. We will maintain a high level of ambition in 2024 as well to improve the financing conditions for innovative start-ups and technology firms in Germany through a reinvigorated VC ecosystem.
KfW Capital celebrated its 5th birthday on 15 October 2023 - a fitting occasion to share some numbers from the "Responsible VC Fund Investor": Up until that day, KfW Capital invested more than EUR 1.9 billion in over 100 VC funds with support from the ERP Special Fund, the Zukunftsfonds and resources from KfW. The VC funds in which KfW capital participates invest more than four times the capital brought in by KfW Capital in start-ups and innovative tech companies in Germany.
"In hindsight, there could not have been a better time to establish KfW Capital. The urgency of the sustainable transformation has become increasingly more obvious since 2018, and with it the need to strengthen the VC market accordingly in order to improve the funding situation of innovative tech companies. KfW Capital is a reliable and professional partner of the entire VC ecosystem - in good economic times and in bad ones", sad Dr Jörg Goschin on the occasion of the anniversary.
Five years KfW Capital: an interview with both CEOs, Dr Jörg Goschin and Alexander Thees
Interviews with federal ministers Dr Robert Habeck and Christian Lindner and many more
The Federal Government's Zukunftsfonds, which is set to growth EUR 10 billion by the year 2030, aims to significantly expand growth capital finance by 2030 and beyond by allocating public funds and by mobilising private capital. The various elements of the Zukunftsfonds will particulartly benefit start-ups that are in the growth phase and have high capital requirements. Additional funds from the ERP Special Fund, the EIF KfW and private investors will leverage the initial sum. KfW Capital coordinates the Zukunftsfonds on behalf of the Federal Government in close coordination with the Federal Ministry of Economic Affairs and the Federal Ministry of Finance. To sum up: At the end of 2023, nine elements of the Zukunftsfonds are already in place, around EUR 8.5 billion are available to be drawn down by VC funds and start-ups, and more than EUR 2.2 billion have already been committed to private funds and private companies.
KfW Capital itself is already implementing the following modules of the Zukunftsfonds:
Since the summer, KfW Capital has invested in VC funds that focus on climate tech and associated climate-relevant thematic fields under the newly designed "Green Transition Facility" (GTF). Total funding of EUR 100 million is available for this facility. "The energy crisis has made it clear. Innovations in the energy sector are urgently needed in order to find alternative, efficient and well-priced energy solutions so as to safeguard our prosperity and competitiveness in the long term. KfW Group has therefore set itself the task of playing a lead role in advancing the sustainable transformation by also promoting innovation and entrepreneurship", said Stefan Wintels, Chief Executive Officer of KfW and Chair of the Supervisory Board of KfW Capital, at the launch of the programme. The programme constitutes a new measure under the Zukunftsfonds and contributes to the German government's start-up strategy, in particular to the "innovation and transformation areas" specified therein.
In successfully completing the fundraising in November, KfW Capital reached the target volume of EUR 1 billion for the Wachstumsfonds Deutschland, establishing another major building block of the Zukunftsfonds of the Federal Government. The Wachstumsfonds Deutschland is one of the largest VC funds of funds ever to be set up in Europe - and it is funded primarily from private resources. Besides the Federal Government and KfW Capital, the fund has more than 20 major institutional investors including insurers, superannuation funds, foundations, asset managers, and large family offices. Together with other investors, the Wachstumsfonds, for which KfW Capital acts as an investment intermediary and advisor, invests in VC funds that focus on Europe and Germany. This significantly improves access to urgently needed growth capital for start-ups and innovative technology firms while strengthening Europe and Germany as an innovation location.
Under the new "Emerging Manager Facility" (EMF), KfW Capital has invested since mid-October in smaller VC funds that are managed by women or gender-diverse teams. These teams are often very young first-time entrants to the VC market ("emerging managers"). As it does in all other programmes, KfW Capital first performs customary due diligence, and if the outcome is positive it invests in the VC funds of the emerging managers pari passu with private fund investors. The EMF has a volume of EUR 200 million until 2030 and is a further major building block of the Zukunftsfonds of the Federal Government, which KfW Capital manages on its behalf.
KfW Capital presented the KfW Capital Award in the categories "Best Female Investor" and "Best Impact Investor" for the second time. At the award presentation ceremony on 19 Octover 2023, Itziar Estevez, partner at the VC fund Iris Capital, was awarded the prize for "Best Female Investor", while Tim Schumacher of the "World Fund" climate fund was honored as "Best Impact Investor". 'Female Investing' and 'Impact Investing' are both key themes with great potential for strengthening the VC ecosystem on a sustained basis. The KfW Capital Awards recognise outstanding investors in the VC market and thereby direct attention to the relevance of "more diversity' and "more impact".
For the first time, KfW Capital awarded two partial scholarships for women, each worth EUR 5,000, for the venture capital track of the "Certified Private Equity Analyst" (CPEA) training programme run by the German Private Equity and Venture Capital Association (BVK) and the Technical University of Munich (TUM). KfW Capital offers the two partial scholarships to make more women award of the training course. In order to achieve more diversity in the VC ecosystem, it is important that more women be represented at all levels of the market. The partial scholarships were awarded in a draw at the BVCK's German Equity Conference by KfW Capital's Senior Managing Director Dr Jörg Goschin in May.
The series of talks bring experts together to share their VC knowledge and experience of their specialist fields with interested participants. They provide ample opportunity for discussion, exchanging views, and networking. In a nutshell, this is what the series of events known as the "KfW Capital-VC Academy" stands for. After a successful launch in 2022, we continued the series last year with three topics that have currency for the VC ecosystem. In March, we hosted the event "Female Investing - More Diversity for Better Investments", while in June our guest was the new EIF Chief Executive Marjut Falkstedt, who gave a talk on the topic of "VC Market in Europe: Strong Together?". We dedicated the third VC Academy to the topic of "Venture Debt in the VC Ecosystem".
On the occasion of its 75th anniversary, KfW Group organised a "Zukunftstag" at Frankfurt's FSV football stadium. KfW Capital held interviews with interesting guests to round off the exciting programme, which featured presentations on topics such as "Climate and Environment" and "Managing Impacts and Mobilising Private Capital". Among others, Dr Judith Kälzer-Söding, member of the Supervisory Boad of KfW Capital and founder and Managing Director of the investment firm SOVAGE GmbH, and Dirk Schmitz, CEO of BlackRock Germany, Austria, and Eastern Europe, gave presentations on the smart interplay between public and private capital. Dr Manon Littek, winner of the KfW Capital Award 2022 and founder of the Green Generation Fund, also offered interesting insights into the field of food tech and the nutrition of the future. Interesting portfolio companies of some funds, such as Heliathek and NavVis, also presented their innovative products.
KfW Capital "Leading in ESG
KfW Capital hosted the training series "Leading in ESG" together with the BMW Foundation Herbert Quandt and Venture ESG. This training was developed to support VC funds in incorporating ESG aspects into their business strategy, as sustainable and responsible investment is becoming increasingly important for VC investors. The level of interest is high. So far, 14 funds participated in the three training events held last year. The good news is that the training will be offered again in 2024, including with an event specifically targeting emerging managers.
KfW Capital Professionalises ESG Reporting
Reporting on ESG is an increasingly important topic for KfW Capital and the portfolio funds. KfW Capital already asks VC funds and their portfolio companies for specific ESG data such as their carbon footprint or workforce gender distribution. In 2023, KfW Capital further developed ESG data capture, management, and reporting and further professionalised ESG reporting together with the more than 100 VC funds in which it has thus far invested.
KfW Capital's Advisory Board is an important advisory body for KfW Capital. It convenes a face-to-face meeting once a year. KfW Capital's Advisory Board is currently composed of 28 experts from all areas of the VC ecosystem. It includes fund managers, investors, representatives of associations, professors, colleagues from the ministries, Deutsche Börse, and KfW. In 2023, the Advisory Board met at KfW's Berlin Branch for the first time. It centred on the very intense debate following the panel discussion "The Venture Capital Market in Germany and Europe: quo vadis?", with Dr Fritzi Köhler-Geib, Chief Economist of KfW, Björn Tremmerie, Head of Technology Investments at the EIF, and Christian Miele, Chair of the Budnesverband Deutsche Startups and General Partner at Headline.
KfW Capital began work with 18 staff members in 2018, including the two Senior Managing Directors Dr Jörg Goschin and Alexander Thees. Now, five years later, KfW Capital has nearly 70 staff members. "KfW Capital, too, has grown strongly as a company by taking on more tasks in the past years. Only in this way have we been able to successfully fulfil our mandate to strengthen the VC ecosystem on a sustainable basis. In doing so, we are also keen to ensure diversity, since we believe it is the foundation of a strong team. For example, out interdisciplinary team is now almost 50 % female", commented Alexander Thees, Senior Managing Director at KfW Capital, on the recruitment process which, incidentally, is still ongoing.
