Bayern's decision to adopt venture capitalism signifies more than a mere symbolic policy; the football federation is under pressure to match this strategic move.
The Bavarian Parliament has taken a significant step forward in enhancing Germany's innovation policy by allowing public and private foundations to invest in venture capital funds. This decision, made on July 23, 2025, marks a turning point in German innovation policy and aims to mobilise more private and public capital for promising startups and technology ventures.
Previously, German foundations were primarily confined to investing in fixed-interest papers or real estate, a practice that is almost negligible from an economic perspective, especially in times of inflation, technological change, and geopolitical competition. This new strategy seeks to address this issue and provide a more dynamic investment approach.
There was great uncertainty in Germany about whether charitable foundations could invest in venture capital without endangering their tax-exempt status. The Bavarian Parliament's decision addresses this concern by creating a clear legal framework that allows up to 5% of a foundation's assets to flow into venture capital via fund structures, without endangering the tax-exempt status.
This decision corresponds to common practice in other innovation locations and is considered a game-changer, albeit not in the strict sense, but a desperately needed paradigm shift. Bavaria has shown how to implement this promise with a real systemic change: The foundation as a capital source for innovation.
The investment approval for Bavarian foundations is not a reckless experiment, but a necessary step towards fostering innovation and technological progress in Germany. Venture capital is not the enemy of stability but its prerequisite in the digital age. This decision is a bold move that aligns with the government’s broader strategy of overcoming previous strategic paralysis and technological dependency by injecting fresh capital into critical growth sectors.
The impact on German innovation policy is significant because:
- It mobilises additional funding sources for startups and emerging technology companies beyond traditional public budgets.
- It supports the government’s broader strategy of overcoming previous strategic paralysis and technological dependency by injecting fresh capital into critical growth sectors.
- It aligns with ongoing federal initiatives to establish Germany as a leading hub in technology and innovation, including increased public investment and venture capital backing.
The other federal states must urgently follow suit and allow the possibility for capital to flow where new technologies are emerging, jobs are being created, and social progress is possible. If only one federal state makes a serious commitment to future-oriented capital policy, then Bavaria will become the better Germany, which could be dangerous for the cohesion of the innovation landscape.
In conclusion, the Bavarian Parliament’s decision to allow public and private foundations to invest in venture capital funds enhances Germany’s innovation ecosystem by increasing available risk capital, fostering startup growth, and reinforcing the country’s strategic autonomy in technology development. This decision is a testament to the Bavarian Parliament's commitment to strengthening the capital base for startups and modernizing the framework conditions, a promise made in the coalition agreement of CDU and SPD at the federal level.
- This decision paves the way for charitable foundations in Germany to invest up to 5% of their assets in venture capital, a move that could bolster the country's education-and-self-development sectors by providing essential funding for promising technology startups, thereby bridging the gap in Germany's innovation landscape.
- As an additional benefit, this strategy, similar to practices in other innovation locations, can potentially position Germany as a leader in education-and-self-development, especially in technology, by fostering a dynamic investment approach that caters to the needs of the digital age.
