The centerpiece of the new measures is €500 ($575) million for Germany's venture capital sector to spend over five years to support the formation of funds that invest in early, development and mid-stage technology companies. Rolf Mathies, partner at Earlybird Venture Capital (Hamburg, Germany), says the initiative addresses a current funding gap in the German biotech industry. Announced on October 1 and starting in January 2004, the program is jointly funded by the Federal Ministry of Labor and Economics (BMWA; Berlin) and the European Investment Fund, which is the venture capital arm of the European Investment Bank (Luxembourg). This measure is expected to leverage another €1.2 ($1.4) billion in private sector finance.
The new approach suggests that the government may have learned from previous experience, although all the details on how the funds will be allocated were not available as Nature Biotechnology went to press. Previous federal and state programs, such as the BioRegio contests launched in the mid-1990s (Nat. Biotechnol. 15, 943, 1997), sought to encourage international funds to invest in German firms by offering soft loans, matching funds and investment guarantees backed by the government. Coupled with other structural barriers to the biotech sector's progress, these practices led to 31 bankruptcies in 2002 compared with only 25 new company creations, according to Ernst & Young's 2003 report on German biotechnology, At the Crossroads. Mathies says the new initiative is more market-oriented because the allocation of money will be determined solely by venture capital investment criteria over a period of up to five years with a divestment expected over the next ten years. And German taxpayers will no longer have to pick up the tab for failed investments.
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