Landscape of CVC in Germany

The German corporate venture capital (CVC) market has emerged as a significant player in the global startup ecosystem over recent decades. German corporations increasingly recognize the strategic value of investing in startups worldwide, driving innovation and maintaining a competitive edge. This article provides a historical overview of Germany's CVC landscape, showcases success stories, and examines the factors behind its growing prominence.

Germany leads Europe but trails the US, China and Japan

Germany boasts the highest number of companies with CVC programs in Europe, exceeding 100 and surpassing the UK. This is particularly noteworthy given that the UK dominates Europe's VC industry, yet lags behind Germany in corporate VC initiatives.

Figure 1: European countries with the most companies with CVC

Source: CB Insights (2023)

Globally, Germany ranks fourth in CVC programs, behind the United States, which has a significant lead with approximately 800 companies engaged in CVC. China and Japan occupy the second and third positions, each with over 300 companies involved. In the US, CVC has become ubiquitous among large corporations, with over 75% of Fortune 100 companies investing in venture capital. Moreover, an increasing number of medium-sized US companies are entering the CVC arena.

The Evolution of German Corporate Venture Capital

While CVC has been integral to U.S. corporations' innovation strategies since the 1960s, German companies only began exploring this avenue in the 1980s. This shift occurred as large corporations recognized the strategic value of investing in emerging companies aligned with their objectives.

Germany's CVC journey began with the founding of Techno Venture Management (TVM) in October 1983. This pioneering initiative aimed to bridge the gap between technological innovations and their commercial applications, aligning with Germany's robust industrial base in automotive, engineering, and chemicals. TVM launched with an initial capital of 116 million Deutsche Marks ($37 million USD), backed by industry giants like Deutsche Bank, Siemens, Bayer, Mannesmann, and Daimler Benz. Early investments were typically conservative, focusing on Germany's traditional strengths in automotive, chemical, and engineering sectors.

The 1990 German reunification provided further momentum, as efforts to revitalize East Germany spurred new governmental and corporate initiatives. The late 1990s saw a surge in German companies establishing CVC arms, driven by the global tech boom and the rise of the digital economy. Traditional German corporations were compelled to engage with innovative startups to maintain their competitive edge. Despite a brief setback during the dot-com bust in the early 2000s, Germany's CVC landscape has since expanded, encompassing a diverse range of sectors and solidifying its position in the global innovation ecosystem.

The German CVC Landscape in 2024

The slide below presents the landscape of German companies' CVC in 2024. It reflects both the country's traditional economic strengths and its evolving business ecosystem. As of 2024, Engineering and Financial Services sectors dominate the CVC scene, mirroring their significant roles in the German economy.

However, the past two decades have witnessed a notable diversification. Other sectors such as media, food, and retail have experienced substantial growth in CVC activity. This shift illustrates the broadening scope of corporate innovation strategies across various industries in Germany. This expansion not only demonstrates the adaptability of German businesses but also highlights the increasing recognition of CVC as a vital tool for fostering innovation and maintaining competitiveness in a rapidly changing global market.

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with clickable logos (CVC websites) here as a PDF file

Figure 2: Germany's Corporate Venture Capital Landscape in 2024

Sources: Geo VCG, company websites (2024)

Success Stories in German CVC

Germany's CVC landscape boasts numerous success stories. Below, we highlight examples from some of the country's most prominent CVC programs, illustrating their strategic impact and contribution to innovation.

Siemens Next47

Established in 2016, Siemens Next47 operates as an independent unit of the global industrial manufacturing and technology leader. It focuses on early-stage startups developing disruptive technologies in artificial intelligence, robotics, and decentralized electrification. A standout investment is Lilium, an electric aviation startup pioneering vertical takeoff and landing (VTOL) aircraft. Siemens' strategic partnership has significantly accelerated Lilium's development, bringing urban air mobility closer to reality.

BASF Venture Capital

As the world's largest chemical producer, BASF has been a longstanding player in the CVC arena. BASF Venture Capital targets startups in chemistry, materials, and agriculture. Their investment in NBD Nanotechnologies, a company specializing in advanced materials, exemplifies their strategy. This partnership has not only fueled NBD's growth but also catalyzed innovative solutions in coatings and surfaces.

BMW i Ventures

Launched in 2011, BMW i Ventures has quickly become a key player in the German CVC market. Focusing on startups in autonomous driving, electrification, and mobility services, it has made strategic investments in companies like Carbon3D (now Carbon), ChargePoint, and Scoop Technologies. These investments have positioned BMW at the forefront of automotive innovation while simultaneously propelling the growth of these startups.

Sapphire Ventures: A Model of CVC Independence

SAP, a global enterprise software leader, pioneered its corporate venture capital journey with SAP Ventures in 1996. The initiative aimed to secure strategic investments in promising startups while leveraging their innovations to enhance SAP's offerings.

In a significant move, SAP Ventures gained independence in 2011 and rebranded as Sapphire Ventures in 2014. This transition exemplifies a growing trend in CVC, where venture arms operate with increased autonomy. The new structure enhances Sapphire's agility and decision-making flexibility, crucial for navigating the dynamic startup ecosystem.

Sapphire Ventures' investment portfolio spans enterprise and consumer technology, and healthcare sectors. This diversification strategy mitigates risks inherent in the volatile startup landscape while exposing SAP to a broad spectrum of innovations. Notable investments include DocuSign, Fitbit, and LinkedIn, underscoring Sapphire's ability to identify high-potential ventures.

The symbiotic relationship between Sapphire and its portfolio companies is a key strength. Startups gain access to SAP's global network, expertise, and resources, accelerating their growth and development. Conversely, SAP benefits from insights into emerging trends, customer preferences, and innovative business models, informing its strategic direction.

Sapphire Ventures stands as a testament to SAP's commitment to innovation and adaptability in the digital age. This independent CVC model demonstrates how established corporations can effectively engage with the startup ecosystem, fostering mutual growth and staying at the forefront of technological advancements.

Drivers of Germany's CVC Growth

The rise of CVC in Germany reflects the country's determination to maintain its global competitive edge. Four key factors contribute to this trend:

1. Strategic Long-Term Vision: German corporations have a strong long-term strategic outlook, which aligns with CVC's patient capital approach. This synergy allows them to nurture startups, providing the necessary resources and time for experimentation, innovation and growth.

2. Global Competitiveness Imperative: In an increasingly competitive global market, German corporations recognize that staying at the forefront of technological advancements is crucial. CVC investments serve as a strategic tool to foster innovation, adapt to market shifts, and maintain a competitive edge on the world stage.

3. Industrial Diversity: Germany's varied industrial landscape, spanning automotive, industrial manufacturing, media & IT sectors, offers CVC investors a rich tapestry of investment opportunities. This diversity enables the creation of balanced, multi-sector portfolios, mitigating risk while maximizing potential returns and strategic benefits.

4. Robust Innovation Ecosystem: Germany's world-class universities, cutting-edge research institutions, and highly skilled workforce create a fertile ground for startups. This thriving ecosystem produces a steady stream of innovative ventures, making them attractive targets for CVC investments and further fueling the cycle of innovation.

These factors collectively contribute to the growing prominence of CVC in Germany, positioning it as a key driver of innovation and economic growth in the country's corporate landscape.

Germany's CVC is set for robust growth as a diverse range of companies in all sectors, from industry giants to emerging mid-sized firms, embrace the strategic value of global venture investments. This expansion is likely to gain momentum, propelled by the critical need to stay competitive in fast-paced, innovation-driven global markets.