Funding and Investment Berlin

Overview funding (source: own draft)

1. Public Funding

A public funding scheme specially focusing on the game industry is not yet available on the national level in Germany. Currently, specific public funding schemes for the game industry only exist on the regional level (Bundesländer). The national government is aware of the necessity of strengthening the financial support for the game industry and has initiated the “German Games Fond” in the coalition contract. The association of the German Game industry contributed to the design of this fund. The aim is to foster the game industry development in Germany and catch up to the game industry of other countries.

a) Germany-wide

German Computer Game Award
This Award is supported bi-annually by the State of Berlin (alternating with Munich/Bavaria) for games developed at least to 80% in Germany. It covers 14 categories with a total sum of 560,000 € (in 2018) plus 140,000 € in kind for media services.

DEUTSCHER GAME FONDS
(still work-in-progress – the description reflects ideas that are being currently discussed and not yet approved or implemented!)

Possible framework for the future application cycles:

  • Who: Companies who are responsible for the development of a game can apply, headquarter or branch has to be in Germany.
  • What: development of prototypes / production / further development of existing games
  • Nature: not refundable grant
  • Size & conditions:
    - Size: 50 m €
    - General conditions: Culture test has to be passed / no violation of law by the game / game has to be developed for public consumers / no start of the project before application / minimum of 60% of the approved development costs has to be spend in Germany / grant can be cumulated with other grants / co-developments are eligible
    - Conditions for prototypes: Complete development costs has to exceed 30,000 € / grant amounts for 50% of approved development costs / maximum grant of 400,000 € / 80% will be paid at the beginning and 20% at the end of the prototype development / 12 months to complete the prototype / without game development references SDS has to approve the professional knowledge
    - Condition for production: Total costs has to exceed 100,000 € / costs between 100,000 € – 2 m € receive a grant of 50% / costs of more than 8 m € receive a 25% grant / costs between 2 m € – 8 m € receive 25% – 50% grants (linear correlation) / grant will be divided into 4 payments (one at the beginning, two during production, one at the end)
  • Geographical Scope: Germany
  • Time scales: 12 months to complete prototype / decision latest 3 month after application

b) Berlin Regional Public support

Funding
Fundraising in Berlin through regional public agencies (where the public authorities are in part or fully the owners) is potentially possible for both, the “project” (a game) and the “business” (the studio). However, the schema that would work “in principle” for games rely heavily on the notion of “technology innovation” and on university degrees, again with the notion that universities are the ones to bring innovative in put into the business/industry section. It also seems that those types of businesses that are better understood by actors with no expertise in evaluating a game, have more of a chance of being funded, e.g. publishers, distributors, e-sports, serious games, games with a sport content, and tool developers (engines etc.). It is not clear whether this reflects a lack of applications from classic games studios, or a lack of appreciation of the IP of a game, or non-technological innovative character of a game.

Game as a cultural product/project
The “Medienboard Berlin-Brandenburg”, a joint venture between the two states of Berlin and of Brandenburg, originally aimed to promote film productions and the regions as “film and media locations”, now also includes “innovative audio-visual productions”, which includes games. In this respect, the funding is the promotion and support for a cultural product. It supports a game project with up to 50% of the development and production costs as a performance-based interest-free loan. The loan is typically between 25,000 € and 80,000 €, but officially there is not limitation (other than the state aid rule). It can be combined with other funds. In case of full repayment, the amount can be re-used for the next production.

Medienboard

  • What: main film funding board, covers games to a smaller extent for the whole production phase (project related). 3x applications per year.
  • Nature: performance-based repayable interest-free loan on the basis of revenue incurred through the project, repayment obligation expires after 5 years
  • Size & conditions: average loans per game project 50,000 – 80,000 € up to 50% of the total project costs can be funded
  • Geographical scope: Berlin and Brandenburg
  • Time scales: 5 years
  • Other: if repaid, the sum can be re-invested on the same terms for a new project (success funding) – renewed application within 3 years of repayment.

Game as a technical R&D project/product
There is no specific game funding in this area, however, in principle if technological innovation is part of the project, a game studio could well apply for the ProFIT project up to 400,000 € for R&D projects, ranging from 25-80% of co-sharing. There have been vivid discussions on how the IBB application rules define “innovation”. The Berlin Investment Bank (IBB) is an independent organisation of the State of Berlin.

ProFIT project financing

  • What: technological R&D projects by companies & research institutions (as cooperation), or SME on their own
  • Nature: non-repayable grants
  • Size & conditions: up to 400,000 €, max. funding rate in innovation phase industrial research 80% and in experimental development 40% (research institutions in associations) or 25% (large companies in associations)
  • Geographical scope: Berlin
  • Time scales: not mentioned
  • Other: application anytime.

Game as a business company
There is no specific public support dedicated to SME or start-ups from the games sector. However, business-related funding through the Berlin Investment Bank (IBB) and affiliated organisations (BBB and IBB-Bet) show a range of possibilities that in principle also are valid for games studios. The schemes range from grants, to loans, to VC and

– Grants (co-financing, or full, non-repayable)

As for the other German states, there is regional funding (GRW) in support of the regional economy and its businesses. In general, GRW-support is given for investments (into assets or new staff). There is also support for R&D projects with the scheme ProFIT as grant (see R&D above). For technology start-ups, the only grant-based support is the German-wide EXIST scheme, which fosters start-ups by university graduates.
None of them have been widely applied for by game start-ups or SME for fundraising, nor has there been a notable amount of game SME being granted the support.

GRW (regional economy support)

  • Who: existing companies as well as start-ups in the commercial sector with mostly transregional revenue.
  • What: settlement/extension investment, change of production processes, diversification, to create and secure permanent jobs
  • Nature: non-refundable, performance-based grant
  • Size & conditions: min. 10,000 €. For businesses in Sectors C: 10% for large, 20% for medium, 30% for small enterprises. For business in Sectors D: up to 200,000 € for large, 10% for medium, 20% for small enterprises. Increase in staff by 10%. Staff and assets to be kept for 5 years at least.
  • Geographical scope: Berlin – Sector D and Sector C
  • Time scales: 3 years
  • Other: application anytime.

ProFIT early phase financing

  • Who: newly founded, technology-oriented companies strive for implementation of innovation project, not older than 12 months
  • What: early phase 1 = development of company in-house structure and preparations for innovation project (“anchor project”)
  • Nature: grant (can be combined with interest-free loan)
  • Size & conditions: 50% of the expenditure is covered by non-repayable grant, the remaining 50% can be covered by an interest-free loan. A mentor has to be involved with 5% equity.
  • Geographical scope: Berlin
  • Time scales: up to 1 year
  • Other: application anytime, no combination with GWR scheme.

Internationalisation programme

  • Who: SMEs in defined clusters that are of outstanding importance for structural change for Berlin.
  • What: Participation in trade shows, exhibitions, conferences, exchanges, fashion shows and showrooms abroad of a mostly international and professional/technical nature unless such events primarily serve as direct sales events.
  • Nature: Non-redeemable, earmarked grant in the form of partial financing for up to 50% of the expenditure eligible for support
  • Size & conditions: From 3,000 € to 12,000 € max. as support for each individual measure
  • Geographical scope: Berlin
  • Time scales: within 1 year up to 3 events
  • Other: no combination with other schemes

Coaching BONUS

  • Who: young and established SMEs as well as start-ups
  • What: consulting/coaching fees
  • Nature: not-repayable grants
  • Size & conditions: partial funding with co-payment (up to 50%), max. of 8 coaching days per project, limited daily rate for a coach of a max. 1,000 € funding, limited to a max. of 20 coaching days per company
  • Geographical scope: Berlin
  • Time scales: n/a
  • Other: application anytime

Innovation Assistant

  • Who: mainly technology-orientated, legally independent, profit-orientated small and medium-sized enterprises (SMEs)
  • What: project-based employment of graduates from universities/universities of applied science as innovation assistants
  • Nature: non-redeemable grant
  • Size & conditions: up to 50% of the innovation assistant’s gross taxable salary, maximum salary costs 40,000 € (means: support limited to 20,000 €). No more than two innovation assistants can be supported at the same time.
  • Geographical scope: Berlin
  • Time scales: 1 year
  • Other: application anytime, six to eight weeks processing time, cannot be combined with other staff-cost support schemes.

– Loans (low-interest, or with loans guarantees)

There are schemes for commercialising R&D products (ProFIT), for start-ups and young companies (Start or Innovativ), for seed phases (ProFIT Early Phase), and for internal activities.

ProFIT project financing

  • Who: Cooperations of companies (large/SME) with a research institute, or SME on their own.
  • What: technical innovation phases experimental/production development, market preparation and market launch
  • Nature: low-interest loans, interest rate usually 3% – 7%
  • Size & conditions: up to 1 m €, max. funding rate 80% of costs
  • Geographical scope: Berlin
  • Time scales: up to 8 years
  • Other: application anytime.

Berlin Start

  • Who: for start-ups, SMEs and freelancers (< 5 yrs in business)
  • What: founding or take-over of a company and related costs (equipment, running assets etc.)
  • Nature: low-interest loans in conjunction with an up to 80% bank guarantee by BBB Bürgschaftsbank zu Berlin-Brandenburg GmbH
  • Size & conditions: up to 500,000 € (min. 5,000 €). Application is made via the applicant’s house bank, loan goes via housebank – Financing share of up 100%.
  • Geographical scope: Berlin
  • Time scales: 5 years
  • Other: application anytime. Fairly recent scheme

Berlin Innovativ

  • Who: for start-ups, SMEs and freelancers who meet one of the specified innovation criteria
  • What: investment (real estate, equipment etc.), internationalisation, pre-financing of commissions, running assets
  • Nature: Loan in conjunction with an up to 70% liability exemption.
  • Size & conditions: 100,000 € to 2 m €. Application is made via the applicant’s house bank, loan goes via housebank – Financing share of up 100%. Quarterly amortisation.
  • Geographical scope: Berlin
  • Time scales: 3 to 10 years
  • Other: application anytime.

Equity investment

The activities of the State Berlin enclose venture capital for creative industry through their venture organisation IBB Beteiligunggesellschaft.

VC Fonds Kreativwirtschaft

  • Who: for start-ups, SMEs and freelancers that propose technological Innovation or innovative business models, showing a high potential of scalable innovation or increase in value. Belonging to one of those branches: creative industries, life science, industrial technologies, ICT
  • What: investment (real estate, equipment etc.), internationalisation, pre-financing of commissions, running assets
  • Nature: Equity investment
  • Size & conditions: First investments typically 250,000 € to 1 m € and follow-up investments up to 4 m € in return of minority equity holding. Sound medium-term exit possibility, at least another investor for the same amount requested
  • Time scales: not specified (short/medium-term)
  • Other: supporting on average 3-4 creative industry business per year. Supported projects: Hardscore Games, Softgames

2. Private investment

In Germany in general, private investment in games is low. The banks still have a very limited understanding of “games”, or think of it as “gambling” and the like, therefore loans are not readily granted. For VC capital investment it is generally too “hit”-driven and project-based (though the latter would constitute a good basis for an exit). Mostly, investment seems to be done for lower sums either through accelerator programmes, business angels or larger game studios, or on higher sums which do not benefit the broader German games industry that is largely SME-driven.

The prevalent form of private financing in the Berlin game sector is through own capital (42% of the companies). The traditional and in other countries more common type of private third-party investment is “publishing” (only 2% of the companies). However, this is mostly done for finished product or a vertical slice or a prototype. The most spread type of investment is however, personal/own capital.

There are some investors and business angels in/around Berlin who invest in games. Still, equity investment is also very low with 7% of the companies. Half as much as the share from the public funding. London Venture Partners have recently opened an office in Berlin. They focus on investing in European companies in the digital games sector at seed stage with investment sizes ranging from 50,000 € to 500,000 €.

Berlin and Brandenburg also have a business angel association, the Business Angels Club Berlin-Brandenburg e.V. with their independent venture capital organisation BBAF Berliner Business Angel Fondsgesellschaft mbH:

The fact that only 1% of the companies receive bank loans, supports the above made statement of the banks’ reservations towards the game sector.

Examples for investors

EARLY BIRD

  • Who: an international venture capital firm that invests across multiple stages, but in particular seed and early stage
  • What: medical technology, messaging apps, technology -
  • Nature: equity investment
  • Size & conditions: from 250,000 € to 10 m €, with an average of 2.5 m €
  • Geographical scope: no specific area. The company head office is in Berlin, and they have offices in Munich, Istanbul and Palo Alto.
  • Time scales: continuous support, decisions every 6-8 weeks
  • Other: Founded in 1997, they have invested in more than 90 companies with a focus on European companies with global ambition. Supported project: Peak Games.

London Venture Partners

  • What: dedicated to the digital games sector, seed stage
  • Nature: equity investment
  • Size & conditions: from 50,000 € to 500,000 €
  • Geographical scope: European companies
  • Time scales: start-up phase
  • Other: They have recently opened an office in Berlin. The company’s approach applies deep, sector specific knowledge and operational experience to analyse and benchmark, allowing a fast, focused, direct and objective view to be formed.

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Status: 01/2019

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Responsible partners

BGZ Berliner Gesellschaft für internationale Zusammenarbeit mbH