Currently about 200 to 250 VC companies form the core of the institutional VC market in
Germany.36 As for the informal segment of this market, a study by Lessat et al. (1999) estimates
that roughly 27,000 business angels actively invest in growth companies and that a further pool
of 219,000 business angels could be tapped.37
In absolute terms (with respect to the VC portfolio or new funds raised) the German VC
market is still about 10 to 15 times smaller than the US market.38 However, within Europe, the
German VC market in 2001 ranked third with respect to the volume of the VC portfolio (€ 15.8
billion)39 behind the UK (€ 39.8 billion) and France (€ 17.4 billion). The same holds true for the
volume of new funds raised (see table 2).40
Although the banking sector is still an important supplier of new capital, contributing about
32% in 2001, the relative role of banks has decreased over time and is being taken over by
insurance companies (21%), private investments (8%) and (foreign) pension funds (3%). In
Germany (foreign) pension funds as providers of VC were irrelevant until recently. They first
appeared as a separate category in the statistics of BVK in 1995.41 In sharp contrast to this,
pension funds are, and have been for quite some time now, the main suppliers of VC in the US
and in the UK. In both countries pension funds contributed more or less 40% to the funds raised
in 2001. It is worth noting that the public sector plays a significant role as source of VC funds
only in Germany.
With regard to the exit mechanism, the deteriorating climate for new issues due to a bear-
market from March 2000 onwards is clearly reflected in the statistics. The volume divested by
means of an IPO dropped from 19% in 1999 to 8% in 2001. Similar but more pronounced
36 See for instance BVK Statistik (2001) and Deutsche Bundesbank (2000). To compare, the National Venture
Capital Association (NVCA) counts over 470 venture capital and private equity organizations as members (see
www.nvca.org), representing merely a lower limit of active venture capital and private equity companies in the
US.
37 Estimates regarding their potential investment volume run up to € 6.4 billion per year, including the investment
volume of active business angels, which amounts to approximately € 0.7 billion per year.
38 To compare, Germany was about 3.4 times smaller than the US with regard to inhabitants and about 1.3 times
smaller with regard to GDP per inhabitants in 2001.
39 According to the BVK Statistik (2002) the total portfolio volume held by members of the BVK increased to
€ 16.6 billion in 2002 (see figure 2). On average, foreign investors have held a stake of about 30% of the VC
funds in Germany during the period 1996-2001 (own estimations based on data of BVK Yearbooks 1996-2001).
40 The ranking for these three countries is the same on the basis of VC investments as a proportion of the GDP in
2001: 0.646% in the UK, 0.225% in France and 0.215% in Germany (see EVCA Yearbook 2002).
41 Before 1995, the share of pension funds was so small, that it was counted under the category “other”. See
Leopold and Frommann (1998).
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