8 - Transforming North Rhine-Westphalia into a hotspot for venture capital

North Rhine-Westphalia needs to attract more venture capital. The investment of venture capital in start-ups should increase to half a billion euros by 2022 and thus increase five-fold compared with 2017.

Where we are now

Venture capital providers and business angels are important partners for young businesses with big development potential. However, start-ups in North Rhine-Westphalia have thus far lacked access to external capital. According to the NRW Start-up Monitor, only around 42 per cent of start-ups have access to external capital, compared with a nationwide figure of 52 per cent. In comparison with Berlin, and also Bavaria, North Rhine-Westphalia lags a long way behind when it comes to venture capital (see graphic).

Number of start-ups financed by venture capital
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In North Rhine-Westphalia, the number of start-ups financed by third parties is as small as the volume of external finance. But our state is catching up: according to Ernst & Young’s start-up barometer, North Rhine-Westphalia was in third place in 2018 with 59 financed deals – above Hamburg for the first time. The substantial increase in the amount of funding for start-ups is also encouraging, leaping from 96 to 243 million euros within the space of a year.

With an annual contribution of 48 million euros, the NRW.BANK is investing more money than any other development bank in Germany. Germany’s largest seed fund – the High-Tech Gründerfonds – has its head office in Bonn and hosts the largest spring event in Germany: its annual ‘Family Day’. The umbrella organisation for Business Angels – the Business Angel Netzwerk Deutschland (BAND) – also has its headquarters in the city of Essen in North Rhine-Westphalia.

Where we want to be

North Rhine-Westphalia needs to attract more venture capital. The investment of venture capital in start-ups should increase to half a billion euros by 2022 and thus increase five-fold compared with 2017.

What we are doing

  • To identify barriers to venture capital in North Rhine-Westphalia and to discuss approaches for improved framework conditions, the NRW Minister for the Economy, Prof. Pinkwart, has initiated a venture capital round table. This aims to continue the dialogue with venture capital investors. The key concern here is how national and international investors can be specifically involved in North Rhine-Westphalia.

  • The win NRW.BANK Business Angel Initiative brings private investors and young, innovative, fast-growing businesses together.

  • The NRW SeedCap Digitale Wirtschaft doubles the venture capital provided by Business Angels, at the same terms and conditions as through the NRW.BANK. In future, we shall develop the programme services open to all kinds of technology and increase the upper limits from 100,000 euros to 200,000 euros.

  • The NRW.BANK has significantly expanded its commitment to venture capital since 2017. In the coming years, an additional 214 million euros will be available – this equates to almost twice the amount of funds previously available. The NRW.BANK will also make a combination of direct investments and finance via third party managed funds.

  • Through its regional venture capital activities the NRW.BANK is supporting larger and larger regions – unlike with its previous seed fund activities. For this reason, it has initiated the start-up fund, known as the Gründerfonds Ruhr, with businesses in the ‘Initiativkreis Ruhr’. It will shortly be launching a Gründerfonds Rheinland together with regional savings banks.

  • Together with the NRW.BANK, we are planning in future to focus primarily on making direct investments in start-ups in the early phases by means of a separate market-oriented structure, thereby taking a more active role and achieving even greater visibility.