Why Every Startup Needs a Public Funding Strategy in 2025
Pierre Ostrowski
Co-Founder & Managing Partner
A public funding strategy offers startups financial support and a strategic competitive advantage. It minimizes risks, enables growth, and promotes sustainable innovation.
2024 was the year of public funding: According to the Startup Monitor, 48.8% of German startups used public funding programs. But this also means that more than half have not yet taken advantage of any funding. The advantages are clear: A public funding strategy can reduce dependence on investors and simultaneously sends a positive signal – whether to the market or to other investors. Strategically implemented, public funding becomes a long-term financing component that enables growth and, in particular, sustainably supports research and development (R&D).
Why do so many fail at implementation?
Many founders feel overwhelmed and discouraged by the bureaucracy and the complex requirements of the individual funding programs – and therefore only implement applications sporadically. A comprehensive public funding strategy that strategically combines different programs is then hardly conceivable. Overcoming these hurdles is worthwhile: Startups that strategically utilize funding secure crucial competitive advantages. They not only grow more cost-effectively, but often also faster.
A well-thought-out public funding strategy is not a "nice-to-have," but a "must-have" for every startup.
For startups that want to be successful in the long term, it is essential to put the development of a funding strategy on the agenda right from the start – whether through their own time investment or through a competent partner who supports them with applications and planning.
What makes a good public funding strategy?
Research
Identify programs that perfectly match your goals, your focus, and your long-term planning. The selected programs should seamlessly integrate into your business strategy – not the other way around! Avoid the mistake of adapting your business or individual projects to funding programs.
Planning
Allocate sufficient time and resources for the application process from the outset. Also, consider the subsequent accounting of the funded projects. A realistic timeline is essential to avoid stress and ensure the quality of your applications. Don't simply delegate this task to a student intern; involve experienced employees or external experts. Funding is too crucial to your startup's success to be treated as an afterthought.
Management
Implement funding programs strategically by thoroughly understanding their requirements and skillfully combining different programs. It's best to seek support from experienced experts. They can help you optimize the process, avoid pitfalls, and save valuable time.
Preliminary discussions with the relevant funding institutions provide valuable insights and assessments of your chances of securing the respective funding.
Example of a Public Funding Strategy for a Hypothetical Munich-Based Tech Startup
From the outset, a Munich-based tech startup relied on a well-thought-out funding strategy. The journey began even before the actual founding with pre-founder coaching supported by the Chamber of Industry and Commerce (IHK), which was 70% subsidized. Since the founders initially forwent salaries, they focused on covering basic costs through grant funding: the Start?Zuschuss! program enabled them to finance half of their expenses for office space, equipment, and initial employees – with a maximum grant of €36,000.
The innovative product development was supported by the Bavarian BayTOU program, which provides a grant of 45% for personnel and material costs up to €150,000. The founders proceeded strategically: they focused specifically on those costs that could not be covered by other funding programs.
To protect its intellectual property, the company utilized several funding opportunities: The WIPANO program covered half of the patent application costs, up to a grant of €16,000. For trademark registration, they used financial assistance from the SME Fund (grant: €1,000). The next expansion phase was financed by business angels, supported by the BAFA INVEST program, which subsidized their investments with a 15% grant.
For the development of a new AI feature, they successfully applied for funding from the SME Innovative ICT program with a 50% grant rate and collaborated with the Technical University of Munich (TU Munich) on this. As a smart move, they also factored in the tax credit for research and development, which can be claimed retroactively – ideal for claiming many previously unfunded developer personnel costs.
This strategic approach enabled the company to optimally combine various funding programs and secure solid financing for its development from the outset. The total funding was roughly broken down as follows:
The company secured over €800,000 in funding:
- Pre-founder coaching: €5,600
- Start-up grant: €36,000
- BayTOU: €150,000
- WIPANO: €16,000
- Trademark registration: €1,000
- SME Innovative: €200,000
- Research grant: €400,000
You should start developing a well-thought-out funding strategy at the beginning of the year. In the future, it will be essential to survive in the increasingly competitive market.