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Germany: GFF-EIF fund of funds now financing startups in their growth stage

  •  
    Date: 08 December 2021
  • In partnership with the German Future Fund, the European Investment Fund supports new equity funds for innovative later-stage startups.
  • The new facility of up to €3.5 billion focuses on German companies to foster growth in Germany and across Europe and support the later-stage startup ecosystem.

In March 2021, the German government and the European Investment Fund (EIF) joined forces to secure growth- and later-stage financing for German startups. Previously, these startups still relied largely on funding from outside Europe. By the end of October, the GFF-EIF Growth Facility, a new fund of funds of up to €3.5 billion, had already provided €193 million to five portfolio funds for investment in German growth companies. Including other mandates advised or managed by the EIF, total commitments to these five funds stand at €350 million.

The new GFF-EIF Growth Facility is financed by the German Future Fund (GFF), the ERP Special Fund and the EIF. The GFF was set up by the German Ministry of Finance and the German Ministry for Economic Affairs and Energy. It received €10 billion from the German government and is managed by the German promotional bank KfW. The EIF is part of the European Investment Bank (EIB) Group and focuses on supporting small and medium-sized enterprises.

While the facility supports growth- and later-stage financing for startups in Germany, it will also mobilise commitments from other investors for the underlying investment funds to boost growth-funding capacity for the portfolio companies.

As the facility also invests in pan-European funds established outside Germany, it increases the visibility of German growth companies throughout Europe — as demonstrated by fund managers setting up office presences in Germany. At the same time, pan-European funds will support a growth ecosystem in Germany and across Europe — with the facility serving as its nucleus. The overarching aim is to back German companies on their path to internationalisation and global leadership. Today, many later-stage startups are sold to US investors because they cannot find growth financing in Europe.

EIF CEO Alain Godard said: “The EIF is proud to have already established these funds under the umbrella of the GFF-EIF Growth Facility. I’m optimistic that together with the German Future Fund we can give a boost to venture capital financing in Germany.”

Jörg Kukies, State Secretary in the German Federal Ministry of Finance, said: “For us, the EIF is a long-standing and reliable partner in building and developing the German venture capital ecosystem. In that tradition, the GFF-EIF Growth Facility represents one of the first modules of the GFF to be launched. We are grateful to see that already around € 200 million has been contracted to the benefit of German startups.”      

Thomas Jarzombek, Commissioner of the Federal Ministry of Economics for the digital economy and startups, said: “With the German Future Fund we have set an important milestone for a strong venture capital ecosystem in Germany and Europe. I am glad that we have a very successful partner at our side in the EIF. With the GFF-EIF growth facility, we are building on and continuing the long-standing cooperation between the ERP special fund and the EIF. We are thus making an important contribution to ensuring that the financing options for innovative startups in Germany and Europe are permanently improved."

The five portfolio funds currently under the umbrella of the GFF-EIF Growth Facility are:

  • Digital Growth Fund II: With a target size of €500 million, the fund focuses on growth-stage digital business-to-business companies operating in the industrial applications and financial services technology sectors in Germany, Austria, Switzerland and Europe. The predecessor fund successfully supports companies such as Seven Senders, an asset-free virtual carrier network provider in Germany that offers technology-based logistics solutions to e-commerce businesses, stationary/offline retailers, and B2B customers.
  • Eurazeo Growth Fund III: This fund is one of the first EU-based technology growth funds to raise more than €1 billion. It has offices in Berlin, Paris and London and targets the scale-up market in Europe. Eurazeo is at the forefront of ESG and gender diversity best practices and, with CEO Virginie Morgon, one of the very few female-led private equity groups. The fund has already made its first investments, including in Germany. One prominent startup is Doctolib, which offers online booking solutions for appointments with doctors and, notably, COVID-vaccination centres, with a focus on France and Germany.
  • Lauxera Growth I: With a target size of €200 million, Lauxera’s debut fund will invest in growth-stage, healthtech and medtech companies that have demonstrated early product-market fit and revenue growth in at least one country, with the objective to build European champions. Lauxera wants to provide these champions with the financial and strategic resources they need to grow without having to leave the continent. One of the fund’s first German investments is in Berlin-founded Caresyntax, a digital surgery platform that enables operating room teams to predict and improve surgical performance.
  • LSP 7: The fund has an office in Munich and is set to become Europe’s first €1 billion life sciences venture capital fund. Over the last two decades, LSP has positioned itself as a key provider of venture capital to cutting-edge scientific innovators. Successfully exited companies from predecessor funds include Activaero, Affimed, Immunic, Luxendo, Sapiens Steering Brain Stimulation and U3Pharma. LSP 7 will continue to invest primarily in companies that develop new therapeutics, diagnostics and medtech. Around 30% of LSP’s deal flow originates from Germany, Austria and Switzerland and Germany has been at the core of its strategy since its inception.
  • UVC Growth Opportunities Fund I: This co-investment fund focuses on follow-up investments in UVC’s existing portfolio companies in Germany. These companies develop software, industrial technologies and mobility-supporting technologies. One of the first investments of the UVC Growth Opportunity Fund I was in Isar Aerospace, a company that develops small rockets to provide space access for mini-satellites.

The investments in these five funds are only the beginning: the GFF-EIF-Growth Facility will invest €300-350 million annually over a period of 10 years.

Background information

The European Investment Fund (EIF) is part of the European Investment Bank (EIB) Group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments, which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. It is an experienced equity provider for innovative companies, and focuses in particular on digitalisation, clean-tech, life sciences and other socially relevant sectors. More specifically, under the GFF-EIF Growth Facility, the EIF’s objective, besides seeking attractive financial returns, is to help structure and improve the business proposition of fund managers targeting growth- and later-stage companies. The facility leverages on the strategy of the €4.6 billion ERP-EIF facility, a venture capital fund of funds programme established in 2004 with BMWi and funded by the ERP Special Fund and the EIF. It has so far invested in more than 170 funds and co-investment agreements and backed more than 2 800 investments in portfolio companies in Germany and Europe. As such, it is a key player of the pan-European venture capital ecosystem.

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.

The German Future Fund (GFF) was launched by the German government with €10 billion on 24 March 2021. It aims at strengthening innovative startups in Germany in growth- and later-stage phases. The “Zukunftsfonds” is represented by the Federal Ministry for Economic Affairs and Energy and the Federal Ministry of Finance, and managed by the German promotional bank KfW. It will combine various modules, one of them being the GFF-EIF Growth Facility.

The ERP Special Fund is administered by the German Ministry for Economic Affairs and Energy. The former Marshall Fund has been used to support the German economy since 1948. Initially, the focus was on housing construction, but from the 1960s until today, the priority has been on the promotion of small and medium-sized enterprises. It is managed by the Federal German Ministry for Economic Affairs and Energy and is deployed, amongst others, via the EIF and KfW / KfW Capital.

Press contacts

EIF: Donata Riedel, d.riedel@eib.org, +49 30 590047-912 / Mobile: +49 151 14659021.
Website: www.eib.org/press - Press Office: +352 4379 21000 – press@eib.org

BMF: presse@bmf.bund.de, Press Office: +49 30 18 682 4291, Website: www.bmf.de

BMWi: pressestelle@bmwi.bund.de, Press Office: +49 (0) 30 18 615 6121, Website: www.bmwi.de

 

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