GERMANY Law and Practice Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
Another government-backed investment vehi - cle with assets under management of EUR275 million is Coparion, launched by the European Recovery Program (ERP) Special Fund (mandat - ed by the German Federal Ministry for Economic Affairs and Climate Action ( Bundesministerium für Wirtschaft und Klimaschutz , or BMWK)) and the KfW bank. Coparion focuses on Series A, B and C financing rounds for technology compa - nies with a financing volume of between EUR0.5 million and EUR8 million, with up to a total of EUR15 million per start-up. Coparion invests as a co-investor under the same conditions and usually with the same volume as a private inves - tor, such as a business angel or VC fund. Finally, the High-Tech-Gründerfonds does, unlike Coparion, independently provide seed-financing and is backed not only by the BMWK and KfW bank, but also by a consortium of German pri - vate corporations. It has over EUR2 billion in assets under management and focuses on tech start-ups with substantial growth potential. Impact Investing and Corporate VC Impact investing has continued as a theme within Germany’s VC landscape, with a notable emphasis on decarbonisation. Cleantech/energy is a key area for impact funds. Examples include BonVenture in Munich, which supports social enterprises and start-ups across sectors such as education and renewable energy across Ger - many and Europe. Furthermore, the World Fund, headquartered in Berlin, invests in energy, food, manufacturing, buildings and mobility start-ups while Berlin-based Planet A focuses on green- tech start-ups. Corporate VC plays a prominent role in Ger - many’s investment landscape, and DAX-listed companies such as Allianz X, SAP Sapphire and DB1 Ventures (Deutsche Börse Group’s VC
arm) entertain notable, sector-focused VC pro - grammes. Fund-of-Funds A discernible trend towards increased fragmen - tation in private markets investments – particu - larly within VC funds – and extended average holding periods, has led to a noticeable upswing in fund-of-funds activity. This development derives from an increasing number of investors focusing on niche industries or emerging tech - nologies, thus fostering a broader diversification across the VC landscape. The largest fund-of- funds operator in Germany is KfW Capital, with a volume of around EUR2.4 billion. KfW Capital invests across all phases and sectors in VC and venture debt funds with a focus on Germany. Dual-Track Exit Strategy VC funds tend to navigate the increasingly extended timeline by implementing dual-track exit strategies for their ventures. In a dual-track process, a company simultaneously (or sequen - tially) prepares for an IPO as well as a private M&A deal to maximise exit opportunities once market conditions are favourable. In 2024, the Flix transaction showed that private equity opportunities may provide a viable alternative to an IPO exit for late-stage enterprises with con - tinued long-term growth aspirations. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Legal due diligence is usually conducted by the lead investor and includes a review of the com - pany’s capitalisation table and key corporate documents. The process focuses on material terms and encompasses tax considerations, prior financing arrangements, contractual foun -
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