CFOs Call for Improved Conditions for Innovative SMEs
The improvement of the parameters for the sustainable funding of innovative small and medium-sized enterprises (SMEs) by venture capital is essential for safeguarding Germany’s future viability in international competition. This was the conclusion of a discussion between members of the German Bundestag and the Federal Ministry of Economics and Technology with financial and economic experts during the fourth CFO Summit organised by the industry association of the biotech sector, BIO Deutschland.
There was broad consensus in the discussion that the current funding of innovative SMEs is insufficient. The biotech sector in particular, which produces groundbreaking innovations for improving the supply of medication, for the food and animal feed industry, and for cleaner and environmentally friendly industrial processes, relies on funding by venture capital (VC) for its long periods of research and development. However, more incentives are needed for this in Germany. Investments by venture capitalists have even decreased to an alarming extent in recent years, particularly in follow-up finance and in the cases of larger volumes.
Dirk Honold, Co-Chairperson of BIO Deutschland‘s Working Group on Finance and Taxation, said, “If the parameters for VC investments in Germany do not improve fundamentally, then we will endanger one of Germany’s most promising industrial branches.
At the CFO Summit, Jan Schmidt-Brand, a tax expert on the board of BIO Deutschland and also a co-chairperson of the working group, suggested that “making the tax parameters for venture capitalists more attractive, so that Germany becomes more attractive as an investment location for both domestic and foreign capital would be a first step.” He added that as hardly any loans are approved for funding innovative advanced technologies, finance by venture capital in the form of equity capital is vital. As a result, domestic and foreign investors urgently need transparent tax parameters.
Christine Scheel, a Member of the German Bundestag from Bündnis 90/Die Grünen, the SMEs Commissioner, and a member of the Bundestag’s standing committees on economics and finance, also made clear at the CFO Summit that small and medium-sized enterprises tend to need more support in developing innovative products and processes. She regards these companies as the backbone of the German economy and believes that it is therefore necessary to introduce targeted and uncomplicated support for the R&D activities of SMEs. On this topic, BIO Deutschland had previously welcomed the conclusions of the recently published report by the Federal Government’s Commission of Experts on Research and Innovation. According to this report, if federal budget restrictions only permit limited tax incentives for research, then these should be first introduced primarily for SMEs. The report stated that they would have a particularly large economic impact, as SMEs are more affected by finance restrictions in R&D than large companies are.
Deutsche Bank in Berlin was the host of the Germany-wide summit meeting of the biotechnology finance experts. The forum, which is known as the “Biotech CFO Summit” in the sector, brought together some 90 experts from the financial sector of the biotechnology industry, who shared their views and experiences during panel discussions and presentations. The summit topics ranged from the currently needed alterative funding models for innovative companies to the presentation of so-called M&A strategies, using the examples of successful company takeovers, and sessions on recently introduced laws.
The topics of the CFO Summit are selected by BIO Deutschland’s Working Group on Finance and Taxation, which is chaired by Dirk Honold, BRAIN AG, and Jan-Schmidt-Brand, a member of the board of BIO Deutschland and CEO/CFO of Heidelberg Pharma AG. The event is generously sponsored by Deutsche Bank as a platinum sponsor, KPMG and SAP as gold sponsors, Investitionsbank Berlin and MIG Fonds as silver sponsors, and the event’s media partner, BusinessWire.
 Gutachten zu Forschung, Innovation und Technologietransfer – Leistungsfähigkeit Deutschlands. Berlin: 2010. P. 27. (Available in German only).