Startup and Scaleup Strategy 2026: new framework for formation, growth and financing
On 22 July 2026, the Federal Government adopted the new Startup and Scaleup Strategy; the Bundesministerium für Wirtschaft und Energie (Federal Ministry for Economic Affairs and Energy) published a press release on this on the same day. The strategy paper was published on 24 July 2026 and is available to the Deutscher Bundestag (German Federal Parliament) as information from the Federal Government dated 22 July 2026 in Bundestagsdrucksache 21/7450 (Bundestag printed paper).
The strategy comprises 152 measures and replaces the start-up strategy of the previous government from 2022. According to the published information, it was preceded by an online consultation with around 300 submissions and ten workshops with approximately 200 participants. The measures are distributed across eight fields of action; for the first time, a separate area of “security and defence” is provided for, alongside financing, spin-offs, reduction of bureaucracy, and procurement and competition, among others.
The starting point of the strategy is the assumption that startups and scaleups are of considerable importance for economic dynamism, technological renewal and the competitiveness of Germany as a business location. According to figures from the German Startup Association, 3,053 startups were newly founded in the first half of 2026; this corresponded to an increase of 52 percent compared with the second half of 2025. At the same time, the development of insolvencies and liquidations points to significant risks: according to the Startup Dashboard Germany, their number nearly doubled from 835 in 2022 to a total of 1,429 in 2025.
With the strategy, the Federal Government is pursuing in particular the objective of making it easier to start a business, accelerating growth and keeping innovation in Germany. Above all, improved access to sources of financing, the recruitment of highly qualified workers, the transfer of research results into marketable business models and the reduction of regulatory burdens are mentioned. According to the strategy, more companies with billion-euro valuations are to emerge; examples of already successful developments in 2026 include Osapiens, Stark, Neura Robotics and Proxima Fusion.
Financing as a central field of action
Public funds, Future Fund and direct investments
As early as 2021, the Federal Government had provided a total of EUR 10 billion through the Zukunftsfonds (Future Fund). These funds are to be deployed until 2030, among other things through fund-of-funds such as the ERP/EIF fund-of-funds, the ERP-VC fund investment programme of KfW Capital, the High-Tech Gründerfonds and the DeepTech & Climate Fonds.
The new strategy provides for these funds to be expanded in a Zukunftsfonds II, in particular for DeepTech, BioTech and DefenceTech. KfW Capital plays a significant role here. Through the “Scale-up Direct” programme, EUR 1 billion is already available for co-investments with private investors from KfW Capital’s fund portfolio, regularly with investment volumes of up to EUR 50 million per growth company.
In addition, through the newly launched First-of-a-Kind programme, the Federal Government is participating with up to EUR 300 million in private funds that provide venture debt for projects with a high degree of technological novelty and innovation. A second Wachstumsfonds Deutschland (Growth Fund Germany), which is again intended to raise predominantly private capital from institutional investors, is to receive additional capital. According to a communication from KfW Capital, by the end of 2025 the first Wachstumsfonds Deutschland had already committed EUR 825 million to 41 VC target funds within two years, which had financed more than 360 innovative technology companies from various sectors.
From 2027, the High-Tech Gründerfonds is to be expanded, with a fifth fund generation, into the Federal Government’s central platform for direct investments in startups. The DeepTech & Climate Fonds is also to be integrated in this context. Already in 2024, as part of the Zukunftsfonds, the HTGF Opportunity Fonds had been established with EUR 600 million in order to enable co-investments with private investors in selected portfolio companies of the High-Tech Gründerfonds.
Private capital, retirement provision and WIN initiative
According to the strategy, private capital is to be tapped more extensively for the venture capital market. The Altersvorsorge-Reformgesetz (Retirement Provision Reform Act) of 29 May 2026 replaces the previous Riester-Rente as of 1 January 2027. In addition to traditional guaranteed products, a retirement provision securities account without guarantees will be introduced, enabling investments in funds and ETFs and potentially opening up higher return opportunities.
The WIN initiative for growth and innovation capital for Germany, launched in September 2024, is also to be continued and further developed. Alongside Deutschlandfonds, Scale-up Direct and FOAK, the initiative is listed as a central measure in the financing area. The originally stated target of mobilising around EUR 12 billion in private and institutional venture capital by 2030 is to rise to EUR 25 billion.
According to the first WIN annual report of the Bundesministerium der Finanzen (Federal Ministry of Finance) of 28 April 2026, EUR 2.64 billion in WIN commitments had been reported as invested by then, around 61 percent of which in Germany. On 17 September 2026, KfW and the Federal Government announced as a follow-up step that WIN investments in the VC ecosystem would be increased to EUR 25 billion by 2030; at the same time, six out of ten WIN measures were described as implemented. Nevertheless, based on the figures to date, the initiative remains clearly far from its expanded target.
For insurers, the implementation of the reformed Solvency II Directives (EU) 2025/1 and (EU) 2025/2 in a Versicherungs-Sanierungs-Abwicklungs- und-Aufsichtsänderungs-Gesetz (Insurance Recovery, Resolution and Supervisory Amendment Act), which is still in draft form, is intended to reduce capital requirements. This is intended to create greater leeway for investments in innovative asset classes.
INVEST programme and early-stage financing
The INVEST programme is also addressed in the strategy. An evaluation by experts from the Universität Bayreuth (University of Bayreuth) concluded that the programme roughly quadruples the probability that startups will later receive institutional venture capital and has contributed significantly to employment growth.
Since 2013, business angel investments have been supported through the INVEST programme with approximately EUR 30 million annually. The programme is to be extended and further developed. However, the strategy leaves open how the further development is to be structured in concrete terms and expressly makes this objective subject to funding availability.
In connection with the strategy, the Business Angels Association criticised the fact that the almost exclusive focus on venture capital as a financing instrument fails to reflect the realities of many business formations. This criticism is linked to the fact that not every business formation is designed for traditional VC financing rounds.
European financing level and secondary markets
At European level, the Federal Government supports the relaunch of the European Tech Champions Initiative by the European Investment Fund, the European Investment Bank, the Member States and now also major private institutional investors. The first ETCI was launched in February 2023 as a fund-of-funds model for late-stage financing.
With ETCI 2.0, the existing public capital base of EUR 3.85 billion is to be quadrupled and total capital of up to EUR 80 billion mobilised. In addition, the application and assessment procedure of the European Innovation Council for project financing is to be accelerated, among other things through the use of artificial intelligence in the assessment; a higher budget is also envisaged.
To strengthen secondary liquidity, the Federal Government intends to advocate at EU level for a sandbox pilot framework. The aim is to establish an institutionally oriented secondary market for interests in VC and private equity funds. The “TrackVC” data portal, developed by the European Investment Fund together with BlackRock, is also intended to create transparency regarding the venture capital asset class.
Tax approaches and open questions
The Standortfördergesetz (Location Promotion Act) of 9 February 2026 increased the maximum amount for the tax-neutral “roll-over” under § 6b Abs. 10 EStG (German Income Tax Act) from EUR 500,000 to EUR 2 million. It is now to be examined whether the minimum holding period under § 6b Abs. 4 Nr. 2 EStG (German Income Tax Act) can be reduced from six to four years.
An extension to shares in corporations held as private assets is still not envisaged. As a result, the practical significance of the measure remains doubtful, because private individuals subject to income tax are generally unlikely to hold startup participations as business assets.
A modernisation of the tax treatment of private equity funds is also to be examined. The observation that, for income tax purposes, a partnership as a fund is not an independent taxable entity and that no trade tax is incurred in the case of asset-managing activity captures the difficulties only in part. For the distinction between private asset management and commercial trading, the BMF-Schreiben (Federal Ministry of Finance circular) of 16 December 2003, with criteria requiring interpretation, remains decisive, while there is no clear statutory rule for VC and PE funds typically structured as a GmbH & Co. KG (limited partnership with a German limited liability company as general partner), insofar as they do not fall under the Investmentsteuergesetz (German Investment Tax Act) and the dividend transparency option for special investment funds provided there.
The Federal Government also intends to examine possibilities for improvement regarding § 8d KStG (German Corporate Income Tax Act). The provision enables loss carryforwards to be preserved under certain conditions where business operations are continued unchanged. From the perspective of the assessment expressed in the discussion, however, it would be more targeted to exclude capital increases that provide a company with the financing required for its further development entirely from the scope of a harmful acquisition of shareholdings within the meaning of § 8c KStG (German Corporate Income Tax Act).
Exit channels and capital market
For venture capital investors, the sale of participations is regularly decisive in order to realise returns. The strategy therefore aims to strengthen exit channels. As a measure, reference is made to the fact that, under the Standortfördergesetz (Location Promotion Act), shares may now also be issued with a nominal value of less than EUR 1.
The authorisation of such shares under § 8 Abs. 7 Satz 2 AktG (German Stock Corporation Act) facilitates in particular shares from rights issues and the admission of German shares to foreign stock exchanges where lower nominal values can be traded. In addition, the Federal Government intends to advocate at EU level for the review of special obligations that are linked solely to stock exchange admission and make access to the capital market more expensive or more difficult without a compelling connection to market integrity or investor protection.
The comparison with the United States remains a recurring point of reference. Federal Minister for Economic Affairs Reiche pointed out in advance that in Germany only around 0.15 percent of gross domestic product flows into venture capital, compared with around 0.8 percent in the United States. The original article states a ratio for 2025 of 0.16 percent of GDP in Germany compared with 0.9 percent in the United States.
Spin-offs from science and research
IP transfer, model documents and entrepreneurship education
The strategy attaches central importance to the transfer of intellectual property from universities and research institutions for innovation. For this purpose, a national IP strategy for science-based spin-offs is to be presented. In particular, standardised spin-off agreements and guidelines for valuing IP rights are envisaged.
The German Spin-Off Framework has already been presented; it was developed under the leadership of the Institute for DeepTech Innovation at ESMT by a group of representatives of VC investors, including business angels, research institutions, technology transfer offices and lawyers. The Federal Government is also planning a central IP toolbox in which model agreements, checklists and guidelines are to be bundled.
Entrepreneurship education is also to be strengthened. As an example, the strategy mentions a “Gründung in school” office at the Bundesministerium für Wirtschaft und Energie (Federal Ministry for Economic Affairs and Energy).
Funding programmes for science-based startups
Spin-offs from science are to be supported by sufficient funds in the exist funding programme. The exist Startup Factories launched in October 2025 are to be accompanied by public relations measures.
In addition, there are programmes from the life sciences sector. Go-BIO initial is intended to identify and further develop early research approaches with innovation potential. The subsequent Go-BIO next programme is, as a measure of the Hightech Agenda Deutschland (High-Tech Agenda Germany), focused on biotechnology spin-offs.
Regulatory sandboxes, research infrastructure and data use
The Bundesverprobungsgesetz (Federal Testing Act) adopted by the Deutscher Bundestag (German Federal Parliament) on 25 June 2026 is intended to strengthen regulatory sandboxes and similar structures as instruments of innovation transfer. This is intended to facilitate the testing of innovations and new technologies under real-world conditions.
The European Innovation Act, adopted by the European Commission in September 2026, is also intended to contribute to this. It is aimed in particular at an EU-wide uniform framework for research and development as well as at the valuation and commercialisation of IP rights.
The Federal Government also intends to examine the need for infrastructures for DeepTech startups, such as prototype workshops, clean laboratories and comparable facilities. Existing infrastructures are to be made more easily accessible. With the F.A.S.T. transfer initiative, research results and market needs are to be brought together via a digital transfer marketplace.
Security and defence as a separate field of action
Russia’s attack on Ukraine in 2022 forms the security policy background to the fact that DefenceTech has developed dynamically in Germany. According to a press release by KfW Research dated 13 February 2026, EUR 1.16 billion flowed into German DefenceTech startups in 2025, and thus more than 50 percent of all European VC investments in this area. According to other figures, nearly a quarter of all startups are developing so-called dual-use products that can be used both for civilian and military purposes.
The Federal Government therefore intends, as part of Zukunftsfonds II, to create vehicles for direct federal investments in startups and scaleups in this area. According to published assessments, the timetable and target volume of such an investment vehicle via Deutschlandfonds or Zukunftsfonds remain open. In addition, funding instruments of SPRIND, the Bundesagentur für Sprunginnovationen (Federal Agency for Disruptive Innovation) founded in 2019, are to be made more usable for the defence sector.
The investment criteria of the European Investment Fund, which have so far excluded weapons of war, are to be adjusted in order to enable financing of startups and scaleups in the security and defence sector. Network and cooperation structures are also to be strengthened, such as SVI-Connect as a digital matchmaking platform linking requirements of original equipment manufacturers with the capacities of qualified suppliers, as well as the NATO network DIANA.
In addition, the strategy refers to the NATO Innovation Fund. This venture capital fund, supported by 24 NATO countries including Germany, has more than EUR 1 billion in capital and is focused on DeepTech and dual-use companies in the defence and security sector. Bitkom welcomed the strategy’s stronger DefenceTech focus and European dimension, but at the same time assessed individual points as too vague.
Reduction of bureaucracy and formation processes
According to the Deutsche Startup Monitor 2025 of the Bundesverband Deutsche Startups e. V. (German Startups Association), 88 percent of startups cite less bureaucracy as the most important factor for founding a company abroad rather than in Germany. The Federal Government therefore intends to accelerate formation processes through consistent digitalisation, also in connection with the EU Inc.’s “28th regime”.
The Förderzentrale Deutschland is to be further developed as a central online portal for funding applications. A draft Gründungsbeschleunigungsgesetz (Startup Acceleration Act) is to be presented by the end of 2026. Uniform and automated recording of all formation data is intended, among other things, to accelerate the allocation of tax and commercial register numbers as well as business registrations.
The European Commission’s proposal for a 28th regime, i.e. the EU Inc., is expressly supported with the aim of reaching agreement by the end of 2026. In addition, online notarisation is to be made possible also for transfers of GmbH shares. In the assessment of the original article, it is pointed out that this does not call into question in principle the notarisation requirement for share transfers, although its complete abolition is being discussed on grounds relating to the protective purpose and international practice.
Procurement and competition
Public procurement forms a separate field of action, “procurement and competition”. The background is that young companies have so far participated in public tenders only to a limited extent. The Vergabebeschleunigungsgesetz (Procurement Acceleration Act) of 18 May 2026 is intended to improve participation opportunities for startups.
The strategy mentions in particular the following elements:
- simplification of procurement procedures,
- greater consideration of the situation of young companies,
- direct federal contracts without a call for competition in the supply and services sector up to a contract value threshold of EUR 100,000,
- a “Digitaler Marktplatz Deutschland” as a joint platform for data-based, networked and AI-supported procurement procedures,
- materials, guidelines and best-practice examples on innovation partnerships under § 19 VgV (German Public Procurement Ordinance).
The strategy also refers to the Digital Markets Act, Regulation (EU) 2022/1925, and the Data Act, Regulation (EU) 2023/2854. Both sets of rules are intended to facilitate access to data that may be required for data-based business models and thereby improve competitive conditions for startups vis-à-vis large market players.
At the same time, the Federal Government recognises that German data law is a difficult-to-navigate web of individual laws, duplicate checks and documentation obligations. This burden affects smaller companies and administration in particular. A planned Datengesetzbuch (Data Code) is to bundle individual rules; in addition, a Forschungsdatengesetz (Research Data Act) is to improve the legally secure use and linking of public data for scientific research.
Skilled workers, participation models and international work
According to the Deutsche Startup Monitor 2025, around 522,000 employees work in startups. Of these, 32 percent have an international background; the proportion of women is 28 percent. Shortages of skilled workers are considered a significant obstacle to growth for scaleups.
A digital “work-and-stay agency” for skilled labour immigration is intended to counter this. Administrative processes are to be digitalised and centralised. Cross-border telework is to be further facilitated through the European multilateral framework agreement of 2023; under it, employees may, under certain conditions, perform up to 49 percent of their working time in their state of residence without social security responsibility shifting from the state of employment to the state of residence.
According to the strategy, employee equity participation is to be strengthened. However, what is merely being considered is an increase in the annual tax allowance under § 3 Nr. 39 EStG (German Income Tax Act) for startups and scaleups as well as a deferral of the payment of social security contributions with regard to § 19a EStG (German Income Tax Act), while revenue shortfalls are to be avoided. In the assessment of the original article, this is regarded as too limited, because tax allowances offer only limited incentives for companies that are aiming for a one-off exit.
Cooperation, internationalisation and location marketing
The strategy notes a noticeable decline in cooperation between startups and medium-sized companies as well as industry. This cooperation is to be taken into greater account in existing federal funding programmes and supported by the de:hub initiative.
The German Accelerator is to be further strengthened for the internationalisation of German startups. In cooperation with the foreign trade agency Germany Trade & Invest, it is to support German startups in scaling on international markets.
With “Startup Germany”, an overarching brand is to be established in the startup sector. On the one hand, it is to promote networking between startups and established companies and, on the other, serve as a worldwide identifier. A bilateral innovation network between Israel and Germany is also envisaged via the open platform “exist Startup Bridge Germany-Israel”, intended to connect science-based spin-offs with venture capital providers.
As a welcome signal to innovative foreign companies, investors and talent, an “INVEST in Germany Summit” is planned in Berlin in mid-October 2026. In connection with the strategy, the Bundesverband für Social Entrepreneurship (Federal Association for Social Entrepreneurship) criticised the fact that social entrepreneurship projects no longer play a role in the new version, while the armaments-related focus has been significantly expanded.
Assessment of the strategy
The strategy bundles a large number of individual measures, including projects already initiated, supporting activities and new review mandates. It should be emphasised positively that the Zukunftsfonds is to be placed on a permanent footing beyond 2030 and that a Wachstumsfonds II is envisaged. Nevertheless, the effectiveness of central elements, in particular the Zukunftsfonds, Wachstumsfonds and WIN initiative, depends to a considerable extent on the mobilisation of private capital.
Key points are merely addressed or made subject to funding availability. This concerns in particular the INVEST grant in the early stage and the tax treatment of employee participations. An increase in the INVEST grant through renewed opening for follow-on financing is not formulated as an objective, nor is the exclusive taxation of granted employee participations with capital gains withholding tax only in the exit case, as provided for in the share option model of the draft EU Inc. in Art. 79 Abs. 2 and 3.
According to the assessment taken in the original article, the planned online notarisation of GmbH share transfers also does not go far enough. Rather, it would be worth considering abolishing completely the notarisation requirement under § 15 Abs. 3 and 4 GmbHG (German Limited Liability Companies Act) for share transfers. Such a change would move closer to international market standards and reduce costs in participation agreements in which obligations to transfer shares are provided for.
The strategy also does not expressly address the state aid law issue of “undertakings in difficulty”. Under Art. 2 Nr. 18 Buchst. a AGVO (General Block Exemption Regulation), an undertaking is in difficulty, among other things, if a GmbH has lost more than half of its subscribed share capital as a result of accumulated losses; in principle, only small and medium-sized enterprises established less than three years previously are exempt. In the procedure for the planned recast of the AGVO, eight Member States, including Germany, proposed a structural adjustment under which subordinated capital that is economically equivalent to equity should be disregarded in the over-indebtedness test.
The question of a clear statutory rule on the tax transparency of registered alternative investment funds under the KAGB (German Capital Investment Code) or under the EuVECA, EuSEF or ELTIF Regulation also remains open. Such a rule could help to avoid deemed commercial character or commercial status with legal certainty. Investment incentives such as extending the “roll-over” under § 6b Abs. 10 EStG (German Income Tax Act) to shares held as private assets, especially by business angels, are also not envisaged.
Funding reservations are understandable in view of the strained budgetary situation. At the same time, tax incentives can help to strengthen Germany as a business location. The comparison of VC investments in Germany with the United States and with parts of Europe shows that there is considerable catching up to do.
Handelsblatt reported that the Federal Government had not presented its own metrics for measuring target achievement under the strategy. This also results in a certain vagueness in the later assessment of success. Christoph Stresing, managing director of the Startup Association, called at the end of August 2026, after the cabinet retreat, for swift and ambitious implementation of the strategy.
Overall, according to the assessment of the original article, it might have been more effective to list fewer measures and provide for more far-reaching steps in central framework conditions. Revitalisation could come in particular from the European level and the implementation of the EU Inc. According to the draft known to date, this also provides for opening up to the capital market without prior conversion.
A high-performance capital market remains of considerable importance for the VC industry. Public capital can stimulate private funds, but cannot replace them. An additional perspective could arise from the reform recommendations of the Rentenkommission (Pensions Commission) of 23 June 2026, which, following the Swedish model, provide for a combination of pay-as-you-go financing and a funded premium pension, with part of pension contributions invested in the stock market to stabilise the statutory pension.
Frequently asked questions
What does the Federal Government’s Startup and Scaleup Strategy 2026 regulate?
The Startup and Scaleup Strategy 2026 comprises 152 measures in eight fields of action, including financing, spin-offs, security and defence, reduction of bureaucracy, and procurement and competition. It is intended to make it easier to start a business, accelerate growth and keep innovation more strongly in Germany.
What practical consequences does the Startup and Scaleup Strategy 2026 have for companies?
For companies, changes may arise above all in financing programmes, public procurement, data access, spin-offs and skilled labour immigration. However, many measures are subject to review or funding availability, meaning that their concrete impact depends on further implementation.
What role does venture capital play in the Startup and Scaleup Strategy 2026?
Venture capital is a focus of the strategy, in particular through Zukunftsfonds II, Wachstumsfonds II, KfW Capital, the WIN initiative and European financing instruments. Criticism has been voiced that other financing realities of business formations are reflected only to a limited extent as a result.
Capital markets law classification by MTR Legal Rechtsanwälte
The Startup and Scaleup Strategy 2026 touches on numerous issues at the interface of venture capital, fund structuring, employee participation, capital market access and the regulatory framework. For companies, investors and high-net-worth individuals, this may give rise to complex legal and tax implications, in particular in financing rounds, participation models, exit structures and capital market transactions. MTR Legal Rechtsanwälte advises clients in these contexts internationally and on an interdisciplinary basis; further information can be found at legal advice in capital markets law.
