Germany’s Federal Ministry for Economic Affairs and Energy last week launched fundraising efforts for High-Tech Gründerfonds (HTGF) III with a target size of €300m ($338m).
HTGF is a public-private seed-stage venture capital fund that counts the ministry as its cornerstone investor. It was established in 2005 and focuses on domestic startups less than a year old.
The fund provides up to €600,000 at seed stage and up to €2m in total for each portfolio company, though this will change with the new vehicle. Startups have to be younger than three years and can secure between €200,000 and €1m at seed stage and up to €5m in total capital.
HTGF closed its first fund, which was backed by development bank KfW and six corporates including telecommunications firm Deutsche Telekom, consumer electronics conglomerate Siemens and industrial conglomerate Robert Bosch, at €272m.
A second fund followed in 2011, sized at €304m with the backing of KfW and 18 corporates including enterprise software provider SAP, retail group Tengelmann and chemicals producer BASF.
The ministry has not yet revealed whether any of those companies will back HTGF III, though with a return on the first fund of €67.9m by the end of 2015, it seems likely that several will elect to contribute to the latest fund. The government hopes to attract between 20 and 30 corporate backers.
HTGF has been doing increasingly well as a seed investor. The number of startups approaching the fund for investment has more than doubled between 2009 and 2015, and with 40 to 50 commitments each year, HTGF takes part in more than half of seed investments in Germany.
The fund may be dominating the seed stage, but its strategy of priming startups for follow-on investments is definitely working. Between 2006 and April 2016, HTGF-backed startups secured a total of €1.05bn from third parties, of which 79% were private sector.
The commitment of foreign investors has also been boosted to a total of €279m in 105 startups. HTGF has 441 porfolio companies and has celebrated 58 exits and three partial exits to date.
HTGF expects to begin investing from the third fund in autumn next year and hopes to secure €90m from corporates with a minimum commitment of €3m to €5m. HTGF II attracted €44m from corporates with a minimum commitment of €2.5m.
Michael Brandkamp, managing director of HTGF, said: “The positive results of our second fund show that HTGF has permanently enhanced the seed-stage investment market.
“More than €1bn in follow-on investments have been mobilised in more than 900 follow-on rounds, predominantly from private investors. We feel validated in our mission to support founders not only with funding but also know-how and access to significant national and international networks.
“We invite all current stakeholders to continue working with us for HTGF III.” [translated from German by Global Government Venturing]
– A version of this article originallyy appeared on our sister site, Global Government Venturing.