New law

Start-ups May Get Funding Boost

sofatutor
Start-ups such as Sofatutor, a developer of educational aids, have found it hard to source venture capital.
  • Why it matters

    Why it matters

    The new law could help to release government funds, provide tax breaks to investors and remove obstacles to backing start-ups.

  • Facts

    Facts

    • Germany’s start-up sector received backing of just €646 million ($707 million) in 2014, compared to $48.3 billion in the U.S.
    • Germany’s coalition agreement pledges to make the legal and fiscal framework for venture capital more competitive.
    • Berlin-based start-ups employ 75,000 people and reported sales of €11 billion last year.
  • Audio

    Audio

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Even as a student, Stephan Bayer preferred making videos to studying. He didn’t just make them for fun, however, but shot teaching videos, to help his classmates with their cramming.

When the Berliner decided to turn his idea into the online education platform Sofatutor, he and the other co-founders quickly obtained support from the German government’s funding program for start-ups.

Investitionsbank Berlin, a public-sector development bank for the state of Berlin, also provided a loan through its ProFit development scheme.

It’s a great success story, but with success came problems. Sofatutor grew in 2012, and Mr. Bayer needed money. He had to knock on doors, making a total of 10 applications over a period of six months. Then, luckily, the Munich-based venture capitalists Acton Capital Partners got on board.

“In the United States the boot is on the other foot,” says Mr. Bayer. “Venture capital companies are wooing entrepreneurs.”

Many experts regard the laborious search for risk capital as the biggest obstacle to the start-up scene in Germany. According to the BVK, an association that represents the private equity and venture capital sector in Germany, only €646 million ($707 million) was invested in the sector in 2014, significantly less than in the United Kingdom and only a fraction of the $48.3 billion (€44.2 billion) invested in the United States in the same year.

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