Policy Note 61: Public-private fund of funds model and complementary VC policy in Austria

On behalf of the Federal Ministry for Economic Affairs, Energy and Tourism (BMWET), EcoAustria has investigated how Austria's underdeveloped venture capital market can be strengthened. The starting point is the diagnosis that Austria, with a VC volume of just 0.02 percent of GDP in 2024, is lagging far behind in international comparison and that growing scale-ups in particular have hardly any access to capital. The study therefore recommends the introduction of a public-private fund of funds model based on successful examples from Germany and Denmark. Here, the state provides anchor capital or guarantees in order to mobilize private capital from institutional investors such as pension funds and insurance companies. An independent governance structure, internationally recruited fund management and a clear focus on high-growth companies and key technologies that are important for Austria as a business and production location are crucial.

The modeled economic effects illustrate the potential of such an instrument: In a scenario with a fund volume of 500 million euros, up to one billion euros in additional added value can be achieved, accompanied by more employment, rising real wages and positive repercussions on the budget via higher tax and contribution revenues. This results in a considerable multiplier effect, in which one-off public funds generate a multiple of the overall economic benefit.

The study also emphasizes that accompanying political measures are necessary to ensure the success of a VC fund of funds. These include adapting the regulatory framework to make it easier for institutional investors to invest in venture capital, tax incentives to promote investments and start-ups and more attractive employee participation models. Overall, a fund of funds can thus become a central component of a modern industrial strategy that strengthens Austria's innovative power, corporate dynamism and competitiveness in the long term.