8 Ways American Angels Can Access the German VC Market

By Silicon Allee | Investment

This article is published as part of Skytrain – a transatlantic investor community bridging the gap between investors and VC funds in the US and Berlin. Join the network or learn more about what we do here.

More than almost any other investment vehicle, venture capital has always been a bit of an ‘invitation only’ affair. Dominated by banks, pension funds, and other institutions with very, very deep pockets – private investors had to look to other asset classes to put their money to work.

But the landscape has changed a lot in the last few years. Opportunities for private investors to become Angels are popping up all over the place and the democratization of VC seems more and more inevitable. 

For any private investor looking for a way into the VC market, there are basically 8 roads you can take:

  1. Buying shares in a listed VC company or fund
  2. As a limited partner of a private fund
  3. VC fund of funds
  4. Virtual solutions
  5. Special Purpose Acquisition Companies (SPACs)
  6. Crowdfunding
  7. Syndicates and SPVs
  8. Leverage your network

Let’s take a look at each one in turn and how they can be used as an in-road to investing in the lucrative German VC market.

1. Buying shares in a listed VC company or fund

Buying shares in listed VC funds is a relatively low barrier to entry as the minimum investment is much lower. 

There are a few German VC funds listed on the stock exchange with wide portfolios – many of them also have a VC arm that invests in German startups but we recommend doing the due diligence to find the right option for you. 

2. As a limited partner of a private fund

Investing as an LP of a VC fund is another way in but entry barriers – while not as high as those for leading US funds – are still pretty high. The biggest funds with the best access to deal flow only accept tickets starting at €3-5M. 

The VC firms behind the deals launch various funds at different times for LPs. Accessing good deal flow in German VC funds – like everywhere – really comes down to your network and timing. We’ve seen minimum tickets on private deals in Berlin ranging from €5,000 to €250,000 and of course going into the multiple 7-figure mark.

That being said, two things that are even more important than capital for VCs are specialized knowledge and what the Germans call “Vitamin B” – meaning Beziehug (relationship) or in other words, network. So, any successful tech entrepreneur with an established network will stand a much better chance of getting their foot in the door as an LP with the bigger German VC firms.

Checkout Pitchbook’s list of the 10 most active German VCs for an overview.

As always, you need to take a close look at the costs when buying into funds. Often you’ll have to pay an ‘agio’ (premium) when buying the fund shares – usually around 5 percent of the investment amount. 

On top of that, there are one-off costs for marketing and sales, which are deducted from the paid-in capital. Depending on the VC, these costs range from 10 to 16 percent. Costs also include ongoing management fees, which are also deducted from the investment sum.

3. VC fund of funds

There’s a good reason venture capital is a very high risk asset class. The best VCs might get returns of up to 40%, but there’s always a risk the deal won’t even return the capital paid in. 

So many Angels and LPs mitigate the risk by investing in funds of funds (in German, Dachfonds) and other virtual platforms.
Companies like Presight Partners, Redstone, and MK Venture Capital (German language website) operate and invest in various funds – from early-stage to advanced – across a variety of sectors.

4. Virtual Solutions

For more virtual solutions, Berlin-based provider Moonfare gives investors the opportunity to invest directly in VC funds from the USA with a minimum investment of €50,000.

Asset manager Liqid also has a VC arm. Investors here are currently involved in nine venture capital funds, including Khosla Ventures and Lightspeed. The minimum investment is €20,000.

Crowdfunding platform Seedrs also has done a few deals allowing retail investors to invest into venture capital funds, for example Passion Capital in the UK. So far, there haven’t been any German funds on the platform, but it’s worth keeping a lookout.

We also put together a list of the 10 best software platforms for VC investing. There, we highlight various options for US private investors to access German VC funds via Special Purpose Vehicles (SPV) and syndicates starting at a measly €5K.

5. Special Purpose Acquisition Companies (SPACs)

SPACs (Special Purpose Acquisition Companies) are a relatively new way to invest in young tech companies. For the uninitiated, SPACs are basically blank-check companies – stock corporations without an operating business.

They’re not the most transparent way to invest in VC though. At first, the companies are floated on the stock market without any indication as to who they’ll acquire in the next two years. At some point the shell will be merged with a startup, which avoids the need for an IPO. So as the investor, you’re really putting your money on the names behind the SPAC (and their investment track record) rather than the portfolio itself. 

The first time this was done on the Frankfurt stock exchange was in early 2021. German VC firm Lakestar, floated their portfolio company HometoGo through a SPAC deal. Since then, we’ve seen a number of SPACs in Germany, most recently German Electric Carmaker e.Go in July. 

SPACs had quite a moment in 2021 but since the recent economic downturn they have fallen out of favor. There are still opportunities to be had though. When it comes to SPACs, you need to look closely. You’re looking for startups with a proven business model and a clear path to profitability.

6. Crowdfunding

The fourth and final way to invest in German startups is through direct investment. To dip a toe in the water, crowdfunding is an extremely low-barrier of entry. There are a few crowdfunding platforms like Seedmatch, Companisto, and InVenture that support German startups.

7. Syndicates and SPVs

Of course, more experienced LPs and high net worth individuals can always invest within their own network. 

Pooling capital together with fellow angels in a syndicate or investment collective is growing in popularity and a great way to democratize VC investing. We published a detailed article on VC syndicates and SPVs in Germany here. 

8. Leverage your network

It’s always good to leverage your network. Organizations such as Business Angels Berlin-Brandenburg, Business Angels Netzwerk Deutschland, Deutsche Börse Venture Network, Business Angels Europe, EBAN, or *ahem* our very own Skytrain Network in Berlin will happily guide you through the nuances of angel investing as well as allowing you to tap into a network of like-minded investors.

Article written by Andrew Wilkinson

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Dieses Vorhaben wurde als Teil der Reaktion der Union auf die Covid-19-Pandemie finanziert.