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The Failed Venture Capital Experiment: 1976–1991

In: Private Equity

Author

Listed:
  • Paul Jowett
  • Francoise Jowett

Abstract

By the mid-1970s the state, whose focus for some years had been upon providing support for companies too small to be served by the likes of the DBG and its competitors, turned its attention to “young” and “technological” companies. No history of private equity in Germany can avoid mention of the ill-fated government-bank initiated Deutsche Wagnisfinanzierungsgesellschaft which was the result of this initiative. Ralf Becker and Thomas Hellmann in their paper The Genesis of Venture Capital — Lessons from the German Experience do an excellent job of analysing why this experiment failed. Becker and Hellmann explain the background to this unusual initiative: Throughout the sixties, there was a growing concern about an equity gap in Germany. While in the mid-sixties a typical German company still had 35% equity, this percentage had fallen to 25% by the early 1970s. Small and medium sized companies had even less equity, about 20%. After the first oil shock, the problem became even more pressing as higher interest rates burdened the balance sheets of companies.1

Suggested Citation

  • Paul Jowett & Francoise Jowett, 2011. "The Failed Venture Capital Experiment: 1976–1991," Palgrave Macmillan Books, in: Private Equity, chapter 3, pages 15-23, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-30866-4_3
    DOI: 10.1057/9780230308664_3
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