Here (without guarantee) an overview of the most important conditions of the INVEST – grant for venture capital:
Acquisition Grant
Principle
Investors in young, innovative corporations that are “small businesses” as defined by the EU receive a subsidy of 20% of their investment amount from the federal government. The aim of the measure is to attract more investors to young innovative companies and to increase the investment power of business angels for the benefit of start-ups. Applications for acquisition grants under this guideline can be submitted until December 31, 2022.
General conditions for the 20 percent grant are:
- Genuine participation (in opportunities and risks) through capital increase between €10,000 and €500,000; the amount exceeding €500,000 is no longer subsidized.
- Maximum grant per investor /per calendar year € 100,000. If the investor is an investment company, the de minimis limit of €200,000 in the current and the two previous fiscal years also applies.
- Per company Maximum subsidy per calendar year of all investors of €600,000 and thus maximum eligible investment of €3 million per year. The amount of the participation(s) exceeding €3 million is no longer subsidized. The company may not have received more than €15 million in venture capital in total, including the subsidized participation.
- Three-year holding period.
The main requirements for the invested company:
- Not older than 7 years.
- Small company as defined by the EU: less than 50 full-time equivalent employees, annual sales or balance sheet total not exceeding €10 million.
- Not a company in difficulty as defined by the EU.
- Not listed on the stock exchange.
- The company must be mainly (75%) active in an innovative industry.
- The eligible industries are derived from a list of 28 industry classifications of the official statistics of the Federal Statistical Office.
Alternatively, a company is also considered innovative if,
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- if it is either the owner of a patent that is no more than 15 years old and is directly related to its business purpose
- or has received public funding for a research or innovation project in the two years prior to submitting the application
- or the company is certified as being innovative on the basis of an external, independent brief expert opinion
- or the company has received funding from the BMWi programs “EXIST Gründerstipendium” and “EXIST Forschungstransfer” or comparable programs of the federal states in the two years prior to the submission of the application for the start-up preparation
- or the company has received an innovation award listed on BAFA’s website in the two years preceding the application
Through the share issue or the convertible loan, the company must
- pursue commercial purposes
- have additional financial resources
During a three-year holding period, the company must
- have its principal place of business in the European Economic Area (EEA), but at least one branch in Germany that is entered in the Commercial Register or one permanent establishment that is entered in the Trade Register. In the case of dependent companies, the controlling company must also have its headquarters in the EEA and be a “small company” as defined by the EU, not in difficulty and not listed on the stock exchange. (Thus, companies whose founders hold more than 50% of their business shares through a Beteiligungs-GmbH – Founder GmbH – are also eligible)
- must be economically active on an ongoing basis
The most important requirements for the investor:
- Natural person with headquarters in the EEA or Beteiligungs-GmbH (Business Angel-GmbH) including UG – haftungsbeschränkt – with headquarters in the EEA including headquarters of the shareholders in the EEA. The number of shareholders is limited to a maximum of ten (instead of six previously) and at least one shareholder must be of age. If the investment is made via a business angel GmbH, each shareholder must also meet the requirements with regard to the investor. A legal form of an EU state comparable to a GmbH is also permitted.
- The business purpose of a Business Angel GmbH must be the “acquisition and holding or sale of investments”. The business purposes “asset management” and “consulting” are only permissible in addition.
- On own account and from own money
- No credit financing
- Not already a shareholder, unless the previously held shares were already supported with an INVEST grant and the possibility of a subsequent follow-up investment was already foreseen in the business plan
- Not affiliated with the company.
The main rules regarding participation:
- Ordinary, fully risk-bearing shares that are newly issued. Customary anti-dilution rules and liquidation preferences are harmless if they apply equally to all investors in a round
- Convertible loans are also permissible under the following main conditions:
- Also permissible convertible loans under the following main conditions:
- Subsequent conversion must be provided for in the loan agreement
- Conversion must be made within 24 months of the notice of approval
- If conversion takes place in several rounds of capital increase, conversion must amount to at least 10,000 euros
- Payment of the acquisition subsidy only after conversion
- Combination with milestone agreement not permitted.
The main rules of procedure:
- Responsible: German Federal Office of Economics and Export Control (BAFA) in Eschborn
- Online procedure
- Two-track:
- Company applies for eligibility, the decision is valid for twelve months
- Investor applies for grant and provides application number of the company
- Payment only after proof of investment, in the case of milestone agreement in accordance with milestone investment, which must, however, amount to at least € 10,000 in each case, in the case of convertible loan only after conversion.
- No recovery of the grant within the holding period if the business model has failed, e.g. in the event of insolvency.
Exit grant
Principle:
The exit subsidy amounts to 25% of the profit from the sale of an investment subsidized with the INVEST acquisition subsidy.
The most important rules for the exit grant
- Recipients of the exit grant are exclusively natural persons
- The acquisition of the shares for which the excess grant is requested must have already been funded by INVEST as of 01.01.2017
- A minimum holding period of three years and a maximum holding period of 10 years apply, so that the exit grant is only eligible for capital gains from 01.01.2020. The application period ends on 30.06.2031
- The profit from the sale must be at least 2,000 euros
- The exit grant is limited to 80% of the issue price of the INVEST-subsidized shares purchased.
Taxation
- On 27.04.2017, the Bundestag adapted the tax exemption of the INVEST grant to the revised INVEST guidelines, and the Bundesrat approved the resolution on 02.06.2017. The new regulation thus applied for the first time to the 2017 tax year, so that all INVEST grants from 01.01.2017 benefit from it. More information here: http://www.business-angels.de/invest-zuschuss-jetzt-in-voller-hoehe-steuerfrei/
Application Forms:
INVEST Hotmail
Questions about INVEST – Grant for venture capital? Ask us your questions about INVEST here. We will answer you directly and immediately, usually within three working days. Alternatively, you can ask the BAND experts here.
Further information:
INVEST Guideline 2021, BAnz AT 26.01.2021 B2 (PDF)
INVEST- Database
The INVEST directory moved in November 2017: The directory, which was previously located on the BAND website, can now be found on the central INVEST website of the Federal Ministry for Economic Affairs and Energy: www.invest-wagniskapital.de
You can find the INVEST-database with eligible companies looking for investors here: http://www.bmwi.de/Navigation/DE/InvestDB/INVEST-DB_Liste/investdb.html
INVEST-eligible companies with a valid eligibility notice from BAFA can register in the database here:
https://www.bmwi.de/Navigation/DE/InvestDB/investDB.html
Status 28.01.2021
