German venture funds urge institutional investors to back next-generation growth companies

Germany’s leading venture capital firms are stepping up pressure on pension funds, insurers and other large asset owners to commit more money to domestic and European growth companies. A new coalition argues that even modest reallocations of institutional portfolios could unlock billions of euros annually for startups and scale-ups, strengthening Germany’s long‑term competitiveness.

The initiative comes as Europe continues to lag behind the US in scaling global technology leaders. German investors control substantial capital, but only a small fraction currently flows into venture and growth equity – a gap the new forum wants to close with a practical roadmap for institutions.

German Venture and Growth Forum launches with new playbook

Twenty-four of Germany’s most prominent venture capital funds have formed the German Venture and Growth Forum and released the “German Venture & Growth Playbook”. The document uses market data to explain the risk‑return characteristics of venture capital as an asset class and outlines how institutional investors can participate in a structured way.

The launch coincides with “Future at the table”, a side event held alongside the SuperReturn conference in Berlin. The discussion brings together senior policymakers and development finance executives, including the Federal Minister responsible for economic affairs and energy policy, the Federal Chancellor’s personal representative for investment issues, and the chief executive of development bank KfW Group.

According to the playbook, with an appropriate investment framework and allocation strategy, around €15 billion of existing private capital could be mobilised each year for German growth companies without compromising market‑driven return expectations.

Venture capital’s role in returns, resilience and employment

The forum argues that a higher allocation to venture capital can strengthen portfolio performance over the long term, provide diversification benefits in volatile markets and support the expansion of innovative businesses. This, in turn, is seen as essential for securing future employment and preserving Germany’s position as an industrial and technology hub.

Globally, companies backed by venture capital represent a large share of the value of the world’s biggest listed firms. VC‑funded players account for a substantial portion of the combined market capitalisation of the top 100 companies worldwide and employ millions of people.

Analyses for Europe suggest that, provided sufficient capital is available, startups could create several million additional jobs and add trillions of dollars in extra market value. The German forum positions venture funding as a key lever for translating Europe’s scientific and industrial strengths into globally relevant companies.

Germany’s capital gap despite a strong industrial base

Germany combines a diversified industrial backbone with deep pools of technical and managerial talent. Yet the forum sees one central structural weakness: limited access to risk capital for fast‑growing companies. This gap becomes particularly visible during later growth stages, when startups need sizeable funding rounds to scale internationally.

German institutional investors collectively oversee roughly €2.8 trillion. The playbook argues that even allocations in the low single‑digit percentage range would be enough to channel urgently needed funds into German and European venture and growth vehicles. Similar levels of participation by pension funds and insurers have long been common in markets such as the United States, typically without special government guarantees and while still targeting market‑conform returns.

Investor and forum member Alexander Kudlich links the widening economic gap between the US and Europe in part to a shortage of growth capital on the European side. In his view, globally dominant technology groups would not have emerged without deep and patient venture funding, and Germany has the financial capacity to better support the industries of the future. The new forum is intended to address institutional concerns and offer concrete solutions for re‑evaluating venture capital allocations.

Three main entry points for institutional investors

The German Venture & Growth Playbook is designed as a practical guide for pension funds, insurance companies, professional pension schemes and foundations. It outlines three core approaches, tailored to different levels of in‑house expertise and organisational resources.

1. Single funds

Investing directly in individual venture or growth funds provides targeted exposure to portfolios typically comprising 20 to 30 companies, often organised around a specific stage, sector or region. General partners actively support these companies from formation through to exit, and usually commit their own capital to the fund. This co‑investment is intended to align the interests of fund managers and their limited partners.

2. Funds of funds

Funds of funds are presented as a lower‑barrier option. They diversify across numerous underlying venture and growth funds and take over the selection, due diligence and monitoring process. This structure can be attractive for institutions that want exposure to the asset class but do not maintain a dedicated venture capital team.

The Wachstumsfonds Deutschland (Growth Fund Germany), launched in late 2023 with a volume of €1 billion, is highlighted as an example of this approach. It aggregates capital to invest in a range of venture and growth funds, effectively spreading risk and operational complexity across a broad base.

3. Co-investments

Co‑investments allow institutional investors to participate directly in individual financing rounds alongside established lead investors. These structures can offer enhanced return potential and a more tailored risk profile, usually at lower fee levels compared with standard fund commitments.

Because co‑investments demand deal evaluation and active decision‑making, they are typically recommended as an add‑on to an existing fund programme or for investors with their own specialised investment teams.

Building Germany’s next generation of large listed companies

Forum participants argue that the current wave of German founders and young companies has the potential to form the backbone of the country’s future growth. They see particularly strong prospects in areas such as artificial intelligence, fusion energy, robotics, quantum technologies, as well as defence and space‑related innovations.

Early-stage investor Christian Nagel from Earlybird notes that these emerging companies will need substantial capital to scale if they are to become the next generation of large, listed firms and keep Germany’s technology‑driven export model intact. Without sufficient funding, promising technologies risk being commercialised elsewhere or acquired prematurely.

Dr. Tanja Emmerling of High-Tech Gründerfonds emphasises that the coalition’s aim is to lower entry hurdles for institutional investors, with the goal of creating a more effective capital structure for innovation, growth companies and future stock market listings in Germany and across Europe.

Next steps for institutional investors

The German Venture & Growth Playbook, which is now publicly available for download, is intended as both an educational resource and a call to action. It encourages institutional investors to review their current private market allocations, evaluate appropriate entry routes into venture and growth capital, and consider step‑by‑step portfolio adjustments.

By systematically integrating venture and growth equity into long‑term investment strategies, the coalition believes German asset owners can capture attractive return potential while supporting the development of globally competitive companies in Europe.