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3 questions to smart minds

How to create optimal conditions for more private equity and venture capital in Germany

For this 3 questions to U. Hinrichs

BVK
Photo: U. Hinrichs | BVK
12. Novem­ber 2013

Germany is not the only coun­try curr­ently expe­ri­en­cing a start-up boom. Foun­der camps are freu­qi­ent as never before. Large compa­nies such as IBM orga­nize start-up days and want to invest in young compa­nies. Young entre­pre­neurs are urgently looking for inves­tors. Unfor­tu­n­a­tely, the amount of VC and PE invest­ments is decre­a­sing instead of incre­a­sing. Both in the early finan­cing stage and in growth finan­cing. — Why are there too few PE and VC funds in Germany and what would be the opti­mal condi­ti­ons for growth in this industry?


For this 3 ques­ti­ons to Mana­ging Direc­tor of the German Private Equity and Venture Capi­tal Asso­cia­tion (BVK) in Berlin

1. What would it take for the number of PE or VC funds in Germany to increase?

s needs excel­lent frame­work condi­ti­ons for equity capi­tal in all areas and a clear poli­ti­cal commit­ment in this direc­tion. What would actually be desi­ra­ble is a sepa­rate legal regu­la­tion for the indus­try, a private equity law, which does exist in other coun­tries. Howe­ver, this is not fore­see­able at present.

As BVK, we there­fore see several measu­res as necessary, such as tax incen­ti­ves that mobi­lize inves­tors, more public invest­ment by KfW and the deve­lo­p­ment banks in equity capi­tal. It would also be necessary to rethink the issue of turno­ver taxa­tion of the funds and with regard to the tax trans­pa­rency of VC funds. Here we call for a legal regu­la­tion that does not create unju­s­ti­fied prefe­ren­tial treat­ment, but elimi­na­tes disadvantages.

2. How can the government encou­rage and faci­li­tate this development?

In any case, it would be desi­ra­ble for the new federal government to refrain from raising taxes. Encou­ra­ging are the hints we hear from the nego­tia­ti­ons regar­ding a possi­ble tax incen­tive for young SMEs inves­ting inten­si­vely in rese­arch and deve­lo­p­ment. This would provide the right and important impe­tus for Germany as a loca­tion for inno­va­tion, which leading econo­mists are also calling for. We see this funding as comple­men­tary to the usual project-orien­ted funding. We see anot­her tax policy facet in the issue of so-called loss carry­for­wards for inno­va­tive start-ups, inso­far as a VC fund enters the company to incre­ase its capi­tal. From our point of view, this regu­la­tion is simply coun­ter­pro­duc­tive. As an asso­cia­tion, we have follo­wed the path taken by poli­ti­ci­ans towards regu­la­tion via the AIFM Direc­tive and have actively and success­fully contri­bu­ted to the discus­sion in the inte­rests of the indus­try. Poli­ti­ci­ans, for their part, should now act and get the necessary tax adjus­t­ment law on the direc­tive under­way very quickly so that a reli­able legal basis is in place at the begin­ning of next year. 

3. Where do you see not only the grea­test poten­tial, but also the most effi­ci­ent approaches?

There is more than enough poten­tial for equity capi­tal or venture capi­tal. The frame­work condi­ti­ons can either put the brakes on or provide a boost. But espe­cially in times of low inte­rest rates on the one hand and also a dyna­mic econo­mic deve­lo­p­ment in Germany, compa­red to the rest of Europe on the other hand, we are moving in an envi­ron­ment that is attrac­tive in this respect. Let’s not forget that equity capi­tal opens up great oppor­tu­nities, espe­cially for SMEs, when we consi­der that many compa­nies will be in despe­rate need of manage­ment succes­sion in the coming years due to demo­gra­phic trends.

It is also important to conti­nue working on conso­li­da­ting the inter­na­tio­nal pene­tra­tion of the German-spea­king private equity region, i.e. in coope­ra­tion with Austria and Switz­er­land, the so-called DACH region. If we think about the export market, we need co-invest­ments here. In terms of approach, BVK will conti­nue to conti­nuously fulfill two exis­ten­tial elements for its members: First, stra­te­gic commu­ni­ca­tion with poli­cy­ma­kers at all levels, and second, promo­ting equity capi­tal and its oppor­tu­nities in the busi­ness marketplace.

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