A Brief Explanation of the INVEST Grant

A special feature of equity investments is that they may be eligible for INVEST grants. The INVEST grant is a state subsidy program for venture capital investments and is awarded by the Federal Office of Economics and Export Control (BAFA). Since 6 February 2023, the application freeze has ended and the INVEST grant can once again be applied for at BAFA. With the reinstatement of the grant, new guidelines will also come into force, which we will inform you about in detail below. The INVEST grant is intended to support young and innovative companies in their search for an investor. This grant is intended to encourage private investors, in particular business angels, to provide venture capital for these companies. However, the INVEST grant is subject to strict conditions.

What are the benefits of the investment subsidy for investors?

Through the INVEST subsidy program, an investor receives an investment grant amounting to 25 percent of the investment sum (since 6th february - formerly 20 percent). For the investor, this reduces the risk of equity participation. After submitting the application online and receiving a positive decision, the investor receives a refund.

For example, if an investor invests EUR 100,000 in a company eligible for INVEST funding and his application for funding is approved, the BAFA will refund EUR 25,000 to his account as a grant. The maximum eligible investment amount is 200,000 euros per investment. With the new directive of 06.02.2023, a so-called "INVEST budget" was introduced, which states that a maximum of 100,000 euros in acquisition grants are eligible per investor.

What are the conditions for the grant?

The shares acquired through the investment belong to the investor. Since 1st march 2022, only the first investment in a startup is subsidisable.  

The investor must hold these shares for at least three years. If he sells them before the end of the minimum holding period, he runs the risk of having to repay the investment grant. If the company fails before the end of the minimum holding period, the investor does not have to repay the subsidy.

For an investor to be entitled to the INVEST grant, he must be a natural person residing within the EEA. Alternatively, an investor can acquire the shares through a limited liability company (GmbH or UG). However, this investment company may not consist of more than six natural persons in order to be entitled to the investment grant.

The minimum investment amount has been 10,000 euros (since 6th february 2023, formerly 25,000 euros) and the acquisition of shares is not allowed to be credit-financed. If an investor already holds shares in a company, subsequent investments are generally no longer eligible. 

Extra: Exit grant for the sale of shares

In addition to the investment grant, the INVEST subsidy program also includes an exit grant. If an investor sells his shares as part of a company sale (exit), he receives a subsidy of 25 percent of the profit in the form of a tax refund. The assessment basis for the amount of the capital gain is the difference between the selling price and the issue price of the shares.

The profit from the sale of the shares must be at least EUR 2,000. The maximum exit subsidy is 25 percent of the investment sum (since 6th february 2023). For example, if an investor has acquired shares worth EUR 100,000 and sells them for EUR 500,000 after more than three years, he will receive an exit grant of EUR 25,000 if the application is approved.

For an investor to be able to apply for an exit grant, he must be a natural person residing within the EEA. In addition, the shares sold must have already received the INVEST grant at the time of acquisition.

What is the application procedure?

First, the company must submit an application for INVEST eligibility to BAFA. An online application is sufficient. The applications are submitted before the start of a financing round. Companisto supports the companies in the application process and informs each investor whether the company is eligible for INVEST funding. The application procedure is deliberately kept very simple so that the investors receive quick and unbureaucratic support and the investment process is impaired as little as possible.

The investor then applies for approval of the investment grant. The application can be made online on the BAFA website and takes about 5 minutes. The investment contract can be concluded between the investor and the company once the online application has been submitted. The online application must then be printed out, signed and sent to BAFA. Complete processing can take up to 6 months. If both applications (application of the company and the investor) are approved, the grant will be transferred directly to the investor's bank account.

You will find all details on the INVEST grant on the BAFA website.

Have you ever applied for an INVEST grant? Write us a comment!