Billion-euro boost for deep tech: Government and KfW ignite the Deutschlandfonds

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The industrial location of Germany faces significant technological challenges in global competition. To cover the enormous capital requirements for the digital and ecological transformation deemed necessary, the federal government and the state development bank KfW officially launched the long-planned Deutschlandfonds on Thursday. The goal is to make the Federal Republic a leading hub for high-tech. To achieve this, state guarantees are intended to act as a strategic catalyst for private capital.

The federal government is providing around 30 billion euros in public funds for this purpose. This use of taxpayer money, through a clever leverage effect, is intended to trigger a total of 130 billion euros in additional investments from the economy. With this, policymakers aim to create a market-economy instrument that specifically contributes to the scaling of innovations in key areas such as IT, quantum computing, biotech, and energy.

The KfW assumes the central role of coordinator for national and international investors. The fund is designed as a flexible umbrella structure that bundles various instruments. This is intended to help address the specific needs of startups, small and medium-sized enterprises, and large industry.

Federal Finance Minister Lars Klingbeil (SPD) emphasizes that public funds will be used specifically to ensure that significantly more private capital flows into future sectors like AI and biotechnology. According to Minister of Economic Affairs Katherina Reiche (CDU), the current situation highlights the high need for modernization: the financial pot is intended to direct capital where innovation arises and supply chains can be made more resilient. KfW CEO Stefan Wintels also sees the mobilization of private capital as the decisive impulse for global competitiveness.

Tech Ecosystem and Digital Sovereignty

The approach is particularly important for the IT industry and the deep-tech scene, with the KfW now also acting as a direct co-investor. Together with private investors, amounts of up to 50 million euros per individual investment in promising young companies are to flow by the end of 2030.

A significant pillar is also the strengthening of the much-invoked technological sovereignty, which includes hardware and critical infrastructure in addition to AI applications. The focus here is on resilient supply chains and the securing of critical minerals through a dedicated raw materials fund. This provides equity and loans to finance projects for the extraction of resources such as lithium. These are considered an important basis for the domestic battery and semiconductor industries.

Furthermore, the executive branch intends to strengthen technological defense capabilities to reduce dependencies on non-European actors. The entire spectrum of economic needs is to be covered. The fund also includes hedging instruments for large investments in hydrogen or the automotive industry. This risk sharing between the state and private investors is intended to lower the hurdles for investors, especially in capital-intensive fields.

Energy Infrastructure and Criticism

A large portion of the deposits is to flow into the modernization of energy infrastructure. Kerstin Andreae from the industry association BDEW views this positively in principle and sees the right course set for growth and the energy transition. She expressly welcomes the fact that the government is taking up ideas from the industry paper Capital for the Energy Transition and is providing a broad mix of instruments for financing energy supply companies. However, Andreae urges that the details of the planned measures, for example in the area of geothermal energy, must be designed quickly and practically.

A central point of criticism from the association concerns equity strengthening. For the successful further development of the fund, it is essential to quickly provide appropriate, viable instruments. The BDEW calls, in particular, for the establishment of a special fund for the heating transition, which must be accompanied by state guarantees and sureties.

Phased Plan and Long-Term Perspectives

The implementation of the Deutschlandfonds will take place in a phased process, which is to begin with initial operational steps in December. In this initial phase, the hedging instrument for transformation industries, the loan program for geothermal projects, and new financing tools for startups will be initiated. From 2026, the second phase will follow with the expansion to include the modernization of energy infrastructure and new private credit funds for innovative industrial technologies.

The planned increase is particularly important for long-term success: under the name "Growth and Innovation Capital," it is intended to close financing gaps in the SME sector. In addition, the establishment of an instrument for securitization is planned to deepen access to the capital market. Overall, the Deutschlandfonds marks an attempt to create a market-oriented ecosystem in the global system competition through strategic risk-taking and to sustainably position Germany as a high-tech location.

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