Innovation needs everyone.

An institutional model for citizen participation in early-stage innovation finance.

The model
01Starting point

Germany is financing early-stage innovation more strongly again. But the capital comes from a narrow circle, and the number of deals is falling.

8.4€ bn

Venture capital for start-ups in Germany in 2025, up 19 per cent on the previous year.1

716rounds

Financing rounds in 2025, the fourth decline in a row.1

9,504€ bn

Financial assets of private households at the end of 2025.3

14.1m

people own shares, equity funds or ETFs, roughly one in five aged 14 and over.4

Venture capital for start-ups in Germany, 2015–2025Investment volume in € bn (bars) and number of financing rounds (line)
Venture capital for start-ups in Germany, 2015 to 2025Investment volume rose from €3.3 bn (2015) to a peak of €17.4 bn (2021), fell to €6.0 bn (2023) and stood at €8.4 bn in 2025. The number of financing rounds has fallen since 2021 from 1,160 to 716.05101504008001200€ bnrounds201520162017201820192020202117.42022202320242025€8.4 bn1,160 rounds716

Source: EY Start-up Barometer, January 2025 and January 2026.12 Volume has recovered since the slump of 2022/23, carried by a few large rounds; the number of deals has been falling since 2021.

Where household financial assets are heldPrivate households in Germany, holdings at the end of 2025, total €9,504 bn
  • 37.2%Currency and deposits€3,540 bn
  • 27.4%Insurance and pension entitlements€2,605 bn
  • 19.1%Shares and other equity€1,814 bn
  • 13.8%Investment funds€1,315 bn
  • 2.4%Debt securities€226 bn

Source: Deutsche Bundesbank, financial accounts, 16 April 2026.3 Just over 60 per cent of “shares and other equity” consists of unlisted shares and other equity; listed shares account for 7.2 per cent of financial assets.

For scale: two flows in 2025New household investment in currency and sight deposits compared with all venture capital for start-ups
Build-up of currency and sight deposits€166.9 bn
Venture capital for start-ups, total€8.4 bn

In 2025, the increase in currency and sight deposits alone was roughly twenty times as large as all venture capital for German start-ups.

Sources: Bundesbank, transactions Q1–Q4 2025;3 EY.1 Both figures are annual flows.

Who finances early-stage innovation todayFinancing stages and capital providers in Germany, simplified. Tap or point at an instrument for an explanation.
Idea, pre-seed
Seed
Early growth
Growth, scale-up
Capital market
State and development banks
Business angels
Venture capital funds
Institutional investors
Private households
Hardly any access. Crowdinvesting is capped at €5 m per project owner within twelve months10 and has no public framework.

The state co-investment instruments work through professional investors and business angels. Private households are structurally almost absent in the early phase, but broadly present on the capital market.

02The early phase

Early means: before there is proof. That is exactly where capital is scarcest and conviction matters most.

Phase 1

Idea

A research result or an idea, a team, but no proof yet that the principle works.

Technology readiness level 1 to 230
Phase 2

Proof of concept

The first experimental proof that the idea works technically, usually in the lab.

Readiness level 3 to 4
Phase 3

Prototype

A prototype under near-real conditions, first conversations with customers.

Readiness level 5 to 6

This is what CIVINCO means by “early”: from the idea to the first prototype.

The valley before the proofUncertainty and available capital across the phases of a young company, schematic representation
Uncertainty and available capital across the phases of a young company, schematic Uncertainty is highest in the idea phase and falls with every proof. Available capital is low at first and only rises markedly after the prototype. Between idea and prototype there is a gap. There, investors decide mainly on the basis of conviction, later on the basis of data.

Schematic, not measured values. The chart summarises the findings documented in the text.

Reason 1

Uncertainty cannot be calculated away

Before the first proof there are no data on which a valuation could rest. Whether an idea works can often only be found out by investing in it and experimenting.27

Reason 2

Knowledge is unevenly distributed, collateral is missing

Founders know more about their venture than any investor. And the value of young companies lies in knowledge and ideas that banks do not accept as collateral.28

Reason 3

Small amounts hardly justify the cost of review

Reviewing a small round takes almost as much effort as reviewing a large one. Capital is moving to the large rounds: in 2025 there were 18 financings of €100 m or more, six more than the year before, but only 430 small ones of up to €1 m, down from 440.1

Conviction

At the start, belief in a venture decides. It is the scarcest resource of the early phase.

Before the proof of concept, nobody can prove that an idea works. Whoever invests at that point decides out of conviction: about the team, the idea and their own judgement. Research shows that experienced early-stage investors deliberately follow their judgement of the founders under exactly this kind of uncertainty, and can be successful doing so.29

EY notes that start-ups are finding it easier to raise capital again once they can show first successes, and that the situation remains difficult for very young companies.1 CIVINCO therefore starts exactly where conviction counts and proof is still missing: it widens the circle of those who can believe in a venture and help carry it.

03The problem

The gap is not just a capital gap. It is also a gap in participation and a gap in information.

3,1

Too little capital for growth

The German Startup Association puts the annual funding gap in Germany at around €30 bn; venture capital would have to roughly triple.11 The Federation of German Industries (BDI) estimates the additional need just to close the gap with the US at €11.4 bn a year.12

At European level, venture capital funds in the US raise about seven times as much as in the EU.5 Between 2008 and 2021, almost 30 per cent of unicorns founded in Europe moved their headquarters abroad, mostly to the US.6

30€ bn annual gap
3,2

Citizens are left out

The less wealthy half of households holds its financial assets almost exclusively in deposits and insurance claims, earning negative real returns. Capital market investments mainly benefit the wealthiest ten per cent.3

Citizens take part in publicly co-funded early-stage innovation neither as providers of capital nor as co-creators. The European Commission sees around €10 trillion of household savings held in bank deposits and wants to mobilise them for productive investment.7

10€ tn in deposits, EU
3,3

Broad participation needs information

Where many small investors decide directly, information asymmetries loom. Research also shows that radically new ventures fare worse in crowdfunding than incremental ones.13

Anyone who wants households to take part in early-stage innovation therefore has to secure not only access but also the quality of the information on which they decide. That is exactly where the design of CIVINCO comes in.14

≠Access alone is not enough
3,4

Innovation is a decision for society as a whole. Today, the wheel is held almost exclusively by experts.

Early-stage innovation determines how we will work, heal, generate energy and communicate. Everyone bears its consequences, including the risks and the distribution of the returns. It is decided by fund managers, business angels and funding agencies. Citizens co-finance it through public money but have no say in the selection.

Who holds the wheel A steering wheel made of six segments, one for each state instrument of early-stage finance: EXIST, High-Tech Gründerfonds, coparion, KfW Capital, Zukunftsfonds and INVEST. The hub reads: in 0 of 6 instruments do citizens have a say. 0 / 6 Instruments in which citizens have a say EXISTHigh-Tech GründerfondscoparionKfW CapitalZukunftsfondsINVEST
State instruments of early-stage financeWho provides the capital and who decides how it is used
InstrumentPublic moneyWho decidesCitizens have a say
EXISTFunding agency on behalf of the ministry
High-Tech GründerfondsThe fund’s investment team
coparionThe fund’s investment team
KfW CapitalManagers of the target funds
ZukunftsfondsFund managers of the individual modules
INVESTThe business angel
Total6 of 60 of 6

Sources: KfW Capital, reporting 2022;15 KfW Capital on HTGF IV;16 Bundestag on the Future Fund.8 EXIST and INVEST are programmes of the Federal Ministry for Economic Affairs. Crowdinvesting is not a state instrument and is not listed here.

04Behaviour and trust

Households’ reluctance is not a lack of reason. It is a response to complexity and a lack of trust.

Why people in Germany do not hold sharesAgreement among non-shareholders, representative survey 2019, selection
  • Fear of a large loss in an economic catastrophe67%
  • Wealth too small66%
  • Lack of knowledge about how to invest65%
  • No trust in stock markets64%
  • Fear that market participants will “pick your pocket”62%
  • Choice of products too complex53%

Source: Ebert, Grote and Laudenbach (2019), n = 2,094 non-shareholders.17 Blue: trust; black: knowledge and complexity; grey: wealth.

72%

of non-shareholders do not know the term ETF; only 8 per cent know what it means.17

58%

of non-shareholders who answer four or five of five knowledge questions correctly still consider their knowledge insufficient.17

A lack of financial knowledge is considered a central explanatory factor.24 Germany, however, does relatively well in international comparison; knowledge alone does not explain the reluctance.19 Experience adds to this: the events around the Deutsche Telekom share led to stock market participation that was around 60 per cent lower, even twenty years later.21 Those who do not trust the market stay away, even when participating would pay off.23

Trust as a shortcutAfter Niklas Luhmann (1968): “Vertrauen. Ein Mechanismus der Reduktion sozialer Komplexität” (Trust: a mechanism for the reduction of social complexity)22
Trust as a reduction of complexity On the left, many tangled lines for the information non-investors consider necessary: fees, risk, price history, balance sheets, timing of purchase, taxation, dividends, providers. They converge in one node, trust in a procedure. On the right, a single straight line leads to the decision.

On the left, the points non-shareholders believe they would need to know about before investing.17 On the right, what trust rests on in CIVINCO: a public operator that documents every step, standardised company profiles reviewed by experts, and fixed caps that limit the risk of every single decision. Whoever trusts a procedure does not have to check every piece of information themselves. Trust does not replace scrutiny; it is what makes action under complexity possible in the first place.22

Thesis

Why a public procedure? Because the state has no profit interest towards its citizens.

Private providers legitimately earn from fees and distribution. That is precisely what part of the mistrust is aimed at: 62 per cent of non-investors fear that market participants will pick their pockets.17 A publicly run procedure can ground trust differently: through accountability, transparency and the absence of any commercial interest towards the participants.

This logic has reached policy advice. The German Council of Economic Experts recommends a state-managed default product for private pensions, modelled on Sweden, to secure broad participation, protect against poor decisions and strengthen trust.20 In the Council’s assessment, broader funded provision would also markedly increase households’ capital market participation and their practical learning.18 CIVINCO carries this idea over to early-stage innovation finance.

People of all ages visit young teams showing their prototypes at simple tables in a former industrial hall.

Innovation that concerns everyone.

05The proposal

CIVINCO opens early-stage innovation finance to citizens. Through a publicly run procedure in which the state selects nothing.

CIVINCO stands for Civic Investment Cooperation: cooperation between citizens and the public sector in financing early-stage innovation. Its guiding idea is citizen investorship: citizens invest as independent investors and choose for themselves which ventures they finance.

The CIVINCO model at a glance Many citizens choose for themselves, in a curated portfolio, which start-ups they invest in: each with a small, capped micro-investment, often in several ventures. Per venture, the micro-investments are aggregated into a swarm investment, which is why the lines to the start-ups are thicker. There is no fund deciding on citizens’ behalf. An expert advisory committee reviews the start-ups and provides standardised information. A public operator runs the procedure; the state guarantees it but makes no selection.
A

Procedural legitimacy

A public operator runs the procedure and documents every step, up to the aggregation of micro-investments per venture. The state guarantees the procedure, not the outcome: it makes no investment decision.

B

Information mediation

An expert advisory committee with a purely professional role reviews the ventures and presents them in standardised company profiles. Citizens thus decide on a comparable basis.

C

Shared responsibility

Small amounts, fixed caps per venture and per household, and a tiered distribution of risk. The caps enforce micro-investment and limit the possible burden.

What sets CIVINCO apart from existing instrumentsSimplified comparison
CIVINCOINVESTCrowdinvestingZukunftsfonds
Who provides capital?Citizens, as micro-investmentsBusiness angels, with a state grantPrivate investors via platformsFederal Government via KfW, with private co-investors8
Who selects?Each citizen, per venture, informed by an expert advisory committeeThe angelInvestors; the platform pre-selectsFund managers
Role of the stateGuarantor of the procedure, no selectionGrant providerSupervisionCapital provider
Access for householdsBroad, with capsNoYes, without a public frameworkNo

From the region to Europe

The model is designed to grow with its reference population without changing its architecture, and it fits the goal of the European Savings and Investments Union.7

Federal state0.7 to 18 m inhabitants31Possible pilot
Germanyaround 83.5 m inhabitants32Federal
European Unionaround 450 m inhabitants33Savings and Investments Union

The model in detail Go to the working paper

06Research and sources

A conditional model, not a claim.

The working paper formulates CIVINCO as a conditional model: whether broad participation improves or worsens capital allocation depends on specifiable conditions, above all the strength of information mediation. From this it derives four testable propositions and an evaluation architecture for a pilot.14

Steiner, T. M. (2026). Collective Risk-Sharing in Innovation Finance: An Institutional Model of Citizen Investorship. Working paper, SSRN. Under review.DOI 10.2139/ssrn.6867205

  1. EY (2026): Startup-Barometer Deutschland, January 2026. ey.com
  2. EY (2025): Startup-Barometer Deutschland, January 2025 (time series 2015–2024). ey.com
  3. Deutsche Bundesbank (2026): Geldvermögensbildung und Außenfinanzierung in Deutschland im vierten Quartal 2025, press release of 16 April 2026, with tables. bundesbank.de
  4. Deutsches Aktieninstitut (2026): Aktionärszahlen 2025. dai.de
  5. Balakrishnan, R. (2025): Europe's Elusive Savings and Investment Union. IMF, Finance & Development, June 2025. imf.org
  6. Draghi, M. (2024): The Future of European Competitiveness. European Commission, September 2024.
  7. European Commission (2025): Savings and Investments Union, strategy of 19 March 2025. finance.ec.europa.eu
  8. German Bundestag (2024): printed paper 20/12574, Federal Government reply on the Future Fund (Zukunftsfonds). bundestag.de
  9. Bitkom (2026): statement on KfW’s first report on the WIN initiative, 28 April 2026. bitkom.org
  10. ESMA (2025): Q&A 2437 on Art. 1(2)(c) of Regulation (EU) 2020/1503. esma.europa.eu
  11. Startup-Verband (2024): Innovationsagenda 2030, cited in t3n. t3n.de
  12. BDI, cited in German Bundestag, printed paper 20/12307. bundestag.de
  13. Chan, C. S. R. & Parhankangas, A. (2017): Crowdfunding Innovative Ideas: How Incremental and Radical Innovativeness Influence Funding Outcomes. Entrepreneurship Theory and Practice, 41(2), 237–263.
  14. Steiner, T. M. (2026): Collective Risk-Sharing in Innovation Finance. SSRN working paper. doi.org
  15. KfW (2023): KfW Capital, reporting 2022. kfw.de
  16. KfW Capital (2022): KfW Capital beteiligt sich an vierter Generation des High-Tech Gründerfonds, press release of 14 June 2022. kfw-capital.de
  17. Ebert, S., Grote, M. & Laudenbach, C. (2019): Zum Rätsel der Aktienmarktteilnahme in Deutschland. Frankfurt School of Finance & Management and Goethe University Frankfurt, commissioned by Deutsche Börse AG. uni-heidelberg.de
  18. German Council of Economic Experts (2023): Annual Report 2023/24, chapter 3: capital markets in Germany and the EU. sachverstaendigenrat-wirtschaft.de
  19. Malmendier, U. (2025): Generation Frühstart-Rente. German Council of Economic Experts, working paper 02/2025. sachverstaendigenrat-wirtschaft.de
  20. German Bundestag (2026): printed paper 21/5048, referring to the German Council of Economic Experts (2025): Neustart für die private Altersvorsorge, working paper. bundestag.de
  21. DIW Berlin (2021): Der Fall der T-Aktie: Börsencrashs können dauerhaft Investitionsentscheidungen von Haushalten negativ beeinflussen. DIW Wochenbericht 25/2021. diw.de
  22. Luhmann, N. (1968): Vertrauen. Ein Mechanismus der Reduktion sozialer Komplexität. Stuttgart: Enke.
  23. Guiso, L., Sapienza, P. & Zingales, L. (2008): Trusting the Stock Market. The Journal of Finance, 63(6), 2557–2600.
  24. van Rooij, M., Lusardi, A. & Alessie, R. (2011): Financial Literacy and Stock Market Participation. Journal of Financial Economics, 101(2), 449–472.
  25. NRW.Global Business: High-Tech Gründerfonds and coparion. nrwglobalbusiness.com
  26. Startup-Verband (2023): 1 Jahr Startup-Strategie der Bundesregierung. Wo stehen wir in zentralen Handlungsfeldern? startupverband.de
  27. Kerr, W. R., Nanda, R. & Rhodes-Kropf, M. (2014): Entrepreneurship as Experimentation. Journal of Economic Perspectives, 28(3), 25–48.
  28. Hall, B. H. & Lerner, J. (2010): The Financing of R&D and Innovation. In: Hall, B. H. & Rosenberg, N. (eds.): Handbook of the Economics of Innovation, vol. 1, 609–639. Amsterdam: North-Holland.
  29. Huang, L. & Pearce, J. L. (2015): Managing the Unknowable: The Effectiveness of Early-stage Investor Gut Feel in Entrepreneurial Investment Decisions. Administrative Science Quarterly, 60(4), 634–670.
  30. European Commission: Technology Readiness Levels (TRL), Horizon 2020 Work Programme, General Annexes, Annex G.
  31. Federal Statistical Office: population of the federal states, updated on the basis of the 2022 census (end of 2024: Bremen around 0.7 m, North Rhine-Westphalia around 18.0 m), GENESIS-Online 12411-0010.
  32. Federal Statistical Office (2026): Bevölkerung Deutschlands sinkt im Jahr 2025 um 0,1 %, press release no. 203 of 16 June 2026. destatis.de
  33. Eurostat: EU population on 1 January 2025, around 450 million.

How can we work together?

For research, policy, chambers of commerce and the press: I look forward to hearing from you.