Opportunities for Investors - the Market for Venture Capital in Germany

n recent years, the USA has proved to be the land of innovative technology and forward-looking enterprises. To a large extent, this was made possible by venture capital, which is made available to highly promising companies in an early phase. In Germany, there is still a high potential for venture capital financing in comparison to other countries, as illustrated in figure 1. New investment volume in Germany grew by 47% from 1997 through 1998, from € 1.3 billion to € 1.9 billion (figure 2).

Pro Per capita volume of VC funds in € New investments in VC funds in Germany, in million € (Source: European Venture Capital Association, Yearbook 1999) VC Returns in Comparison Long-term studies in the USA show that investments in VC funds offer (Source: Morgan Stanley 3/98; Venture Economics 2/98, Frank Russel Co.; Dow Jones) a higher return than alternative forms of investment. In the period from 1978 through 1997, investments in the S&P 500 achieved an average return of 17%, small caps 18% and venture capital 21%. If we look at the period from 1993 through 1997, the difference becomes even clearer: 20% and 19% for S&P 500 and small caps compared to 33% returns for venture capital.