Germany's venture capital community is sounding an alarm about the country's funding imbalance. The German Venture and Growth Forum (GVGF), which represents more than 20 leading German venture capital and growth funds managing €28 billion in assets, argues that domestic institutional capital must step up to finance the next wave of global technology companies.

During the first half of 2026, German startups attracted €5.1 billion in investment, yet less than a third originated from within Germany itself. The Forum contends that mobilising an additional €15 billion annually in private capital for growth companies is achievable by increasing institutional allocations to venture capital.

The domestic investment shortfall

Germany's startup landscape remains heavily reliant on foreign investors, particularly when companies move into larger funding rounds. Over the past five years, US investors have supplied as much capital to European companies seeking more than €100 million in growth financing as European investors have. In contrast, roughly 70 per cent of American growth company investment originates domestically.

Christian Nagel, Co-founder and Partner at Earlybird Venture Capital, highlighted the untapped potential within Germany's own borders:

In the first half of this year, €5.1 billion were invested in German startups. Less than a third of this capital came from within Germany. The US typically has a 70 per cent self-sufficiency rate when it comes to investing in its own American growth companies. There is still great potential here for Germany.

Christian Nagel, Earlybird Venture Capital

Nagel also advocated for strengthened cooperation, openness, and engagement to reverse the current pattern of German institutional capital flowing overseas.

To reach US-comparable growth investment levels relative to economic size while maintaining similar domestic investment proportions, Europe would require nearly €30 billion in supplementary annual investment, with Germany accounting for approximately €15 billion of that figure.

Tapping Germany's €2.8 trillion institutional reservoir

German pension funds, insurers, and charitable foundations collectively hold approximately €2.8 trillion in assets, yet these holdings remain predominantly directed toward conventional investments like government bonds and real estate.

Data from the OECD shows that German pension funds achieved average five-year nominal returns of 2.9 per cent, translating to a real return of -0.6 per cent when adjusted for inflation. American pension funds, by contrast, delivered nominal returns of 5.3 per cent and real returns of 1.2 per cent during the same timeframe.

According to Invest Europe figures cited by the GVGF, German institutional investors have committed an average of €400 million annually to European venture and growth funds over the past decade, representing just 0.1 per cent of their allocation rate. Raising this allocation to 2 per cent alone could unlock approximately €15 billion in additional annual investment, the Forum estimates.

Dr Tanja Emmerling, Partner at High-Tech Gründerfonds, views Germany's forthcoming statutory capital pension as a significant opportunity:

The planned statutory capital pension offers an enormous opportunity to increase capital for VC in Germany. Within a diversified portfolio, VC offers exactly what the capital pension is intended to provide: returns and growth.

Dr Tanja Emmerling, High-Tech Gründerfonds

Emmerling contended that venture capital investment would simultaneously reinforce the economic base supporting future pension systems, while insurers could expand their involvement in innovation financing.

Building tomorrow's global technology leaders

Beyond closing the funding gap, the GVGF maintains that Germany's competitive strength and technological independence hinge on its capacity to nurture and keep high-growth technology companies within its borders.

Benedikt von Schoeler, Co-founder and General Partner at Vsquared Ventures, stressed that assessments of Germany's investor appeal must extend beyond traditional sectors:

We cannot safeguard our prosperity and jobs by relying solely on yesterday's business models. An attractive investment location is defined not only by the companies already established there, but above all by those that have yet to be or are being founded and have the potential to grow and scale across the globe.

Benedikt von Schoeler, Vsquared Ventures

The GVGF has released a German Venture & Growth Playbook containing analysis on venture capital risks and returns, urging institutional investors to reassess their exposure to the asset class. The initiative seeks to foster structured engagement among venture capital firms, institutional investors, and government officials, with emphasis on dismantling obstacles to domestic investment.

The core issue transcends simply drawing investment into Germany's established sectors. Success requires ensuring that companies positioned to shape Germany's future economy can access the capital necessary to mature into worldwide leaders.

Source: Tech.eu