The Bavarian State Parliament has introduced a resolution aimed at accelerating innovation and entrepreneurship by mobilising foundation capital for startup investments.
The proposal urges the state government to assess and revise investment regulations, specifically allowing state-affiliated foundations to invest up to 5 per cent of their capital in venture capital funds and fund-of-funds.
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“A major milestone just passed in the Bavarian Parliament on Wednesday, July 23rd 2025, marking a real shift in how foundations can support start-ups and VC funds,” says Michael Brehm, founder and General Partner at Redstone VC, a key player in supporting the initiative in a LinkedIn post.
“Instead of lecturing private companies to do more, Bavaria is taking action itself by enabling private players. Public and private foundations will be allowed and even recommended to invest up to 5 per cent of their assets into venture capital, not via direct investments, but via funds and fund-of-funds, using diversification to manage risk and scale impact,” he adds.
Addresses long-standing issue
This initiative addresses a longstanding issue — the lack of growth capital for later-stage startups in Germany and Europe.
Many startups struggle to secure funding beyond their initial stages, particularly when attempting to raise €100M or more.
Consequently, numerous promising European ventures seek funding from abroad, often from American investors, which results in a loss of innovation, jobs, and intellectual property.
The action
The resolution outlines actionable steps to transform idle institutional capital into active growth drivers, including:
Encouraging state-affiliated foundations to allocate 1–5 per cent of their capital to venture capital funds or umbrella funds.
The resolution cites an example that if a foundation has $350M, it could invest 3 per cent, or about $10M. This money could go into several venture capital funds or funds of funds, allowing them to invest in 100 or more startups and lower their risk through diversification.
Prioritising German and EU-based funds that have a strong connection to Bavarian startups.
“When choosing funds, it’s essential to focus on those that are based in Germany or Europe and support startups from Bavaria or have connections to the region. Investing in venture capital would send a strong message across Germany about boosting private capital. In other countries, foundation investments in startups are already common,” says the resolution
Utilising diversified investment models to reduce risk exposure while supporting a broad portfolio of ventures.
According to the German Private Equity and Venture Capital Association (BVK), simply redirecting 1 per cent of the €10T held by the largest European pension and insurance funds toward startup investments could unlock €100B in new capital.
The resolution also cites that the same logic applies to private wealth, where 1 per cent of household assets in Germany could yield €80B. This is roughly the amount needed to close the financing gap with the US.
Currently, however, the opposite is the case: since the peak in 2021, the volume of venture capital investments has fallen significantly. Consequently, one of the central goals of a successful startup strategy is to mobilise additional capital.
“Congratulations to the just recently elected members of parliament, Dr. Stefan Ebner and Maximilian Böltl, for driving this resolution forward in record time and getting it passed with broad support! You can see and feel the change in attitude and speed. This is another element that makes me optimistic about not only Bavaria and Germany but also Europe in general,” adds Brehm.
