When does public funding trump venture capital?

The short answer: As long as you don’t have product market fit. In more detail:

The early phases of a startup should focus on finding a viable business model and reaching product market fit so that you can start scaling out your business. This search is not predictable and you are not guaranteed to come to a result within a defined period of time. Acquiring venture capital to pay for salaries and experiments makes you lose equity in your startup at the risk that your valuation isn’t increasing commensurately, because you are still searching for but not necessarily finding product market fit. Here comes public funding.

The benefits of public funding are:

• Appropriate amounts of money for the early stages
• No loss of equity (even though valuation may be increasing)
• Easier and faster to acquire than seed funding / venture capital

Public funding has its limits. While public funding can go into the millions of Euro, it can’t compete with middle or later stage venture capital (nor should it). However, using venture capital to figure out your business model is expensive and risky, because you might well be burning through the funds with the only result being that you learn what doesn’t work. Public funding (no loss of equity) keeps the balance between the entrepreneurs and later venture capital.

Deutschland bietet hier viel. Die Menge an öffentlichen Mitteln für Startups ist groß. Sowohl die Finanzierung vor Gründung (dann meist über eine Universität) wie auch nach Gründung kann auf umfangreiche Möglichkeiten zurückgreifen. Mein persönliches Interesse sind Startups aus der Forschung heraus. Falls Ihre Professor:in Sie nicht ausreichend unterstützt, würde ich mich freuen, von Ihnen zu hören (gleich von welcher Hochschule).