The German government seeks to invigorate its startup scene with a state-run venture capital firm, set up with funds from the Marshall Plan. German startups suffer a chronic shortage of venture capital when they need it most: in the growth period that follows their launch, when they’re trying to get their product or service to market.

State development bank Kreditanstalt für Wiederaufbau (KfW) estimates that there’s a funding gap of €500 million to 600 million per year ($574 million to $689 million).“We want more company founders in Germany. We need to catch up internationally,” Economics Minister Peter Altmaier said on 9, October. To that end, he announced the launch of KfW Capital, a public venture capital unit of KfW tasked with investing €2 billion in new companies over the next 10 years and invigorating the German venture capital market.

KfW Capital will deploy funds from the Marshall Plan.To emphasize its aim to get close to the private venture capital scene, the management of KfW Capital includes investment experts from the private sector. KfW Capital will bundle existing government development programs for startups and put the money in funds that invest in startups. That will support startups without having to scrutinize every business model itself. Creating an outsourced KfW unit made sense because it will be subject to fewer regulations than the development bank.