Germany and Europe continue to produce very successful technology companies. This is demonstrated, among other things, by the fact that the cumulative value of companies founded within the last 30 years has increased by approximately EUR 2.5 trillion since 2012. This development speaks for the attractiveness of the European startup ecosystem.

Despite the positive development, German retirees hardly benefit from this dynamic.

An extensive analysis of the ownership structure of German startups by the venture capital firm Redstone shows that German pension - and retirement funds invest significantly less in European future technologies compared to US pension - and retirement funds. German pensions and pension funds represent only a subordinate investor base for German VC funds compared to U.S. pension funds. While pension funds account for about 27% of the investor base (limited partners) in U.S. VC funds and also actively invest in German VC funds, where they account for about 15% of the capital. In contrast, German pension and retirement funds account for less than 1% of the investor base in German VC's.

Thus, German pensioners hardly benefit from the growth of new innovative companies, although both German and European venture capital firms are extremely successful in selecting emerging technology stars, so-called Unicorns. U.S. pension funds indirectly hold about 10% in German startups through investments in VC funds. Of the 47 billion euros that German startups with Unicorn valuations are still worth overall after devaluations, about 4.7 billion euros are held by U.S. pension funds. In contrast, German pension and retirement funds benefit by only about 94 million euros.

The return on investments in venture capital (VC) was not only higher than for other asset classes but also resulted in a significantly lower fluctuation margin (volatility) with similar or better returns when different assets (asset classes) were included in the portfolio, thus providing diversification. This makes VC investments particularly attractive to pension funds with a long-term focus. Case study Flix Mobility, an example of wasted investment potential, is shown by the German business world market leader Flix Mobility. German investors hold a total of about 34% of the company.

However, German retirees benefit almost not at all from this. AmericOn the other hand, American retirees significant value from the US investors involved. Planradar case study The same applies to Planradar, the global market leader for cloud-based construction software from Austria. Here, German and Austrian investors together hold 24%, but neither German nor Austrian retirees get anything out of it, as neither Austrian nor German pensions or pension funds are involved in the respective VC funds.

"There is a very large untapped potential for German and European pension and pension funds to benefit from the success of the European startup ecosystem. Increased participation of pension funds in VC funds could help German retirees to benefit from the success of the German and European startup ecosystem in the future and thus secure the prosperity of their members."
- Michael Brehm, Founding Partner Redstone.