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funding options
Below is a brief description of the financing options available to you. If you need further assistance, feel free to contact the Gründerlotse Bayern (The Founder's Guide Bavaria).
You can also find a detailed overview of all federal funding opportunities via the federal funding database.
Business Angels
Business angels are private investors who put their money into start-ups. They generally invest in the very early stages in fast-growing, innovative businesses and are a step down from conventional venture capital investors. Ideally, such funding would take the same shape as the subsequent venture capital investment, i.e. the business angel would buy shares in the business. No money is paid out until completion of the planned exit (by selling the start-up to another company, for example). If the value of the business has risen and the exit is successful, business angels sell their shares along with all other shareholders (founder(s), other investors). They then – hopefully – get back more than they invested. Given the enormous risk, they expect very high returns (in the double digits, at least).
Funding options: Business Angels
BayStartUP is one of the most important ports of call for start-ups looking for capital. It supports start-ups with services ranging from business planning to building the business up to the first round of financing. The BayStartUP investors’ network includes some 300 active business angels, 100 institutional investors and public funding agencies, making it one of the largest of its kind in Germany and Europe. BayStartUP puts you in touch with specific suitable investors. while coaches give you and your team in-depth training for potential financing negotiations.
You will find a list of various business angel associations on the website of the German business angels network (Business Angels Netzwerk Deutschland, BAND).
Crowdfunding
Crowdfunding is obtained via a crowdfunding platform that encourages investments in projects, real estate or start-ups through social media channels. The platform specifies the contracts and advertises the relevant funding in your network in return for a fee. The capital is usually provided by a large number of people who normally invest micro or mini amounts in a coordinated manner, thus raising the required sum as a ‘crowd’.
Funding options: Crowdfunding
Bundesverband Crowdfunding is the central interest group and network of commercial crowdfunding platforms in Germany.
Loans
You take out loans with your normal bank. You agree a fixed term with them whilst you pay back the borrowed money with interest. The amount you have to pay the bank therefore ultimately depends on the amount of the loan. You will need to be able to provide certain collateral (such as assets) to obtain a loan. As a company founder, you are always personally liable, which is also classified as collateral. The bank has no say in your business decisions, but as your lender, you should keep them updated on the performance of your business.
Learn more about development loans and risk mitigation programmes offered by LfA and KfW; they can reduce the default risk for a bank, or you as the borrower may be able to agree more advantageous terms and conditions than the standard market rate of interest.
Funding options: Loans
With the Start-up Loan Smart from LfA, investments, goods and working capital can be financed. The product is aimed at founders, business successors, small and medium-sized enterprises and freelancers who have been active on the market for less than five years. With the Start-up Loan Smart, small start-up and succession projects can be financed on particularly attractive terms. The maximum loan amount is 150,000 euros (for working capital loans 100,000 euros) per applicant. The Start-up Loan Smart is associated with a mandatory 80 percent release from liability.
With the Start-up and Growth Loan (GuW) from LfA, investments, goods and working capital can be financed with low-interest loans. The product is aimed at established small and medium-sized enterprises, freelancers, as well as founders and business successors. Particularly favorable interest conditions are granted to projects in the GuW funding region, as well as to founders, business successors, small and medium-sized enterprises and freelancers who have been active on the market for less than five years. The GuW funding region comprises the following rural districts and district-free cities: Cham, Freyung-Grafenau, Hof (rural district and district-free city), Kronach, Neustadt an der Waldnaab, Regen, Schwandorf, Tirschenreuth, Weiden in der Oberpfalz and Wunsiedel im Fichtelgebirge. The maximum loan amount is 20 million euros. If a loan cannot be adequately secured in banking terms, depending on the specific case a release from liability or a guarantee may be considered.
With the Universal Loan from LfA, investments, business start-ups and acquisitions, goods, working capital and the refinancing of short-term liabilities can be financed. The product is aimed at companies, freelancers and self-employed persons with group turnover of up to 500 million euros. The maximum loan amount is 25 million euros per project. If a loan cannot be adequately secured in banking terms, depending on the specific case a release from liability or a guarantee may be considered.
With the Innovation Loan from LfA, investments and project-related working capital requirements for innovation projects can be financed. For innovative companies, additional working capital requirements beyond this can also be financed. Depending on the degree of innovation, three funding levels are distinguished: the higher the degree of innovation and thus the funding level, the more favorable the conditions (interest rate reduction plus repayment or grant subsidy). The product is aimed at companies, freelancers and founders. The maximum loan amount is 7.5 million euros (funding level 1) or 15 million euros (funding levels 2 and 3). If a loan cannot be adequately secured in banking terms, depending on the specific case a release from liability or a guarantee may be considered.
With the Digitalization Loan from LfA, investments and project-related working capital requirements for digitalization projects can be financed. Depending on the degree of digitalization of the project, three funding levels are distinguished: the higher the degree of digitalization and thus the funding level, the more favorable the conditions (interest rate reduction plus repayment or grant subsidy). The product is aimed at companies, freelancers and founders. The maximum loan amount is 7.5 million euros (funding level 1) or 15 million euros (funding levels 2 and 3). If a loan cannot be adequately secured in banking terms, depending on the specific case a release from liability or a guarantee may be considered.
Mit dem ERP-Gründerkredit - StartGeld der KfW werden Vorhaben von Gründern und kleinen Unternehmen, die noch keine fünf Jahre am Markt aktiv sind, mit einem Gesamtfremdfinanzierungsbedarf von bis zu 125.000 Euro mit einer zinsgünstigen Finanzierung unterstützt. Die KfW gewährt dabei eine 80-prozentige Haftungsfreistellung und finanziert bis zu 100 % des Gesamtfremdfinanzierungsbedarfs.
Mit dem ERP-Förderkredit KMU der KfW werden kleine und mittlere Unternehmen bei der Finanzierung von Investitionen und Betriebsmitteln mit einem zinsgünstigen Darlehen von bis zu 25 Mio. Euro (Investitionen) bzw. 7,5 Mio. Euro (Betriebsmittel) unterstützt. Junge Unternehmen, die weniger als fünf Jahre am Markt aktiv sind, erhalten besonders günstige Zinsen. Wenn zwei Jahresabschlüsse vorgewiesen werden können, kann eine 50-prozentige Haftungsfreistellung der KfW beantragt werden.
Mezzanine
This type of financing features elements of both equity capital (i.e. an investor shares in the value appreciation) but also third-party loans (borrowings). Mezzanine loans must be paid back within an agreed period, just like other borrowings. The cost of capital is usually a mixture of fixed interest payments that you agree, and a variable component, which might be based on earnings, for example. Generally, whoever is providing the capital has little or no say in how the business is run, i.e. you continue to make all company-related decisions on your own.
Funding options: Mezzanine
BayBG invests in people wanting to set up or acquire a business in Bavaria. The business must not have been set up or acquired more than five years previously. Generally, investments by BayBG take the form of a typical silent holding to co-fund investment and operating equipment needs. The investments run for ten years.
In the field of VC, BayBG Bayerische Beteiligungsgesellschaft acts as lead or co-investor in all sectors, funding growth- and tech-oriented start-ups. Your company needs to have generated its first revenue and be based on a scalable business model.
Venture capital
Venture capital investors (or venture capital lenders) invest in shares in your company – but only for a limited period. The money is intended to fund strong growth in the value of a business so that it can be sold to another company a couple of years later, earning a big return for all shareholders (founder(s) and investors). The bigger the growth of your start-up, the more an exit in the shape of an initial public offering (IPO) may be planned.
You do not repay any money while the venture capital lenders remain invested in your business. Venture capital lenders are co-shareholders and have – in some cases, extensive – rights to co-determination and control.
Funding options: Venture capital
The Bayern Kapital innovation fund (BKI) works with an independent private investor to provide investment capital to young Bavarian tech companies to co-fund innovation projects (operating equipment and investments) at various stages of a business’s development. As the recipient of the capital, you are free to choose the private investor.
The Bayern Kapital Growth- and ScaleUp Fund, in cooperation with private VC providers (VC firms, corporate VCs, family offices, business angels), provides equity capital for growth financing to innovative and technology-oriented start-ups and scale-ups. The investments are intended to co-finance innovation projects to (further) develop new products/processes, expand sales, and advance internationalization, or to further develop product diversification. The Growth- and ScaleUp Fund's investment is typically between €2.0 million and €25.0 million per portfolio company. The maximum amount can increase to up to €50 million per portfolio company in follow-on rounds.
BayBG Bayerische Beteiligungsgesellschaft acts as lead or co-investor in all sectors, funding growth- and tech-oriented start-ups. Your company needs to have generated its first revenue and be based on a scalable business model.
Coparion is a venture capital fund for young German tech companies offering innovative products or services and above-average growth potential. Coparion only invests together with private investors who commit at least the same sums to the financing rounds, and on the same terms and conditions (‘pari passu’). Investors are free to make their own investment decisions.
The high-tech start-up fund (High-Tech Gründerfonds) is an investment fund for tech start-ups in the early stages of up to three years since setup. Investments focus on start-ups demonstrating growth potential in the fields of software, media, internet, hardware, energy and automation, life sciences and chemicals.
A directory of various VC companies in Germany can be found in the list of Bundesverband Deutscher Kapitalbeteiligungsgesellschaften (BVK) members.
Subsidies
A subsidy is a public grant that generally does not have to be paid back. As such, subsidies are the cheapest way to fund a start-up. Subsidies are available for different fields at regional, national or international level. So it is worth taking a bit of time to learn more. Finding out more about possible subsidies early on is particularly crucial as some require applications to be filed prior to incorporating the business.
Funding options: Subsidies
‘Start?Zuschuss!’ is a digitalisation subsidy programme for tech-oriented start-ups with an innovative business model that is particularly fit for the future. The programme targets businesses set up no more than two years previously. The subsidy is 36,000 euros and the business must be registered in Bavaria.
Digitalbonus helps SMEs in Bavaria with digital transformation. The subsidy programme focuses on digital products, processes and services, and IT security. The amount of subsidy is dictated by the size of your business; to apply, go to digitalbonus.bayern where you will learn more about the procedure.
If you have a small business or trade based in Bavaria employing less than 50 people and have an innovative idea you want to realise, you can use the innovation voucher (Innovationsgutschein) to plan, develop or implement new or improved products, production processes or services. The eligible cost of the same must be no less than 4,000 euros and no more than 80,000 euros. Caution: since the subsidy amounts vary depending on the region in Bavaria, the business and the project in question, find out more about the programme first at Bayern Innovativ.
The EXIST start-up grant (EXIST Gründungsstipendium) is aimed at academics, graduates and students who want to realise technologically innovative projects or develop innovative knowledge-based services that build on scientific lessons learned. To successfully apply for EXIST, you must have not yet set up your company – the grant programme run by Germany’s Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, BMWi) is only available during the pre-start-up phase. Applications must be filed in cooperation with a university.
EXIST research transfer phase I (EXIST Forschungstransfer Phase I) is aimed at research teams at universities and non-university research facilities. Grants are given to execute development projects for verifying technical feasibility, to develop prototypes, to compile business plans and, finally, to set up the company. The aim is to enable the further development of research findings that could form the potential basis for setting up a business.
EXIST research transfer phase II (EXIST Forschungstranfer Phase 2) sponsors the performance of further development work, measures to enable you to start doing business, and the creation of the preconditions required to obtain external business funding. Tech-oriented small caps with paid-in capital of at least 25,000 euros can apply for phase II if they were set up during EXIST sponsorship phase I, subject to the key knowledge owners from phase I contributing their knowledge and labour to the new company and being represented by at least one of them on the management board. The founders working for the company must own well over 50% of the shares in the business.
BayTOU aims to promote start-ups in tech areas promising a bright future, and to strengthen newly established businesses. The programme organised by the Free State of Bavaria supports projects focusing on the experimental development of new products, processes and technical services relating to the establishment of tech-oriented businesses. The compilation of a technical concept for setting up a company (pre-development) is also eligible for sponsorship. Applications must be filed with the state of Bavaria, as organiser of the project.
The FLÜGGE programme is aimed at students, university graduates and university staff at state-owned Bavarian colleges who want to realise an innovative business idea focusing on production or services offering clearly recognisable market volumes through their own company. Applicants can be either teams or individuals. Implementation of the innovative business idea must be presented in an informative business plan – with milestones – that indicates the chances of success. Start-up projects must be supported by a university lecturer (‘Mentor’) as well as by experts with practical experience (‘Coaches’) and a start-up network. Projects must be at the pre-start-up phase, with establishment of a company planned during or at the end of the sponsorship period.
The Bavarian regional sponsorship programme sponsors investments in tangible or intangible fixed assets. It is designed especially for companies in economically deprived regions, in rural areas and areas hit particularly hard by unemployment problems. You have to submit your grant application to the local government for the district where you are planning to execute your project. Prior to submitting your application, you should get in touch to set up a consultation.
If you are unemployed and want to set up a business to go full-time self-employed, you can apply for a start-up grant (Gründungszuschuss) from the Jobcentre (Agentur für Arbeit). It can be used to cover your cost of living and social security during the first months while you build your business. Since there is no legal entitlement to the start-up grant, you should seek out the Jobcentre as early as possible for a consultation regarding the terms and conditions (and potential subsidy amount available to you individually). Tell your adviser that you want to set up your own business. Among the other things you should know, be aware that you must have a residual entitlement to at least 150 days of unemployment benefit and that you will need to provide an expert opinion (issued by a chamber of commerce, chamber of trade or bank, for example) on your business model.
The tax allowance is intended to specifically stimulate the research activities of small and medium-sized enterprises. Unrestricted and restricted taxpayers are eligible, provided they are not exempt from taxation. The tax subsidy relates to research and development projects in the categories of basic research, industrial research and experimental development that were started after January 1, 2020. The subsidy takes the form of a tax allowance and amounts to 25% for personnel costs incurred in research and development within the scope of in-house research and development. Research contracts are subsidized at 15%. The assessment basis for eligible expenses is a maximum of EUR 4,000,000 for eligible expenses incurred after June 30, 2020 and before July 01, 2026. Activities that can be attributed to pure product development are not eligible. Please check if you can get support from your consultant.