A chance to boost Austrian startup funding: the Red-White-Red Fund of Funds
Announcement of a new fund with a fund-of-funds structure—referred to in political parlance as the “Red-White-Red fund-of-funds”—marks an important turning point for Austria’s start-up scene. Hurray! After years of discussion, this brings an instrument that has long been established in many other countries. The goal is to pool private capital with public funds to support start-ups and scale-ups through their growth phases. The decision is the result of intensive work by numerous stakeholders—led by invest.austria.
invest.austria—the leading network for pre-IPO investors in Austria and the central hub for all things angel investing, venture capital and private equity—along with many dedicated investors.All of them worked tirelessly to get the fund underway—a political breakthrough, but only the beginning. The real challenge lies in the design: only if the model is positioned professionally, independently, and with international connectivity can it reach its full potential.
Austria’s ecosystem must regain ground
That this step is needed is shown by the latest EY Start-up Investment Barometer. In the first half of 2025, investment volume fell to €110 million—a 64% drop year-on-year, the lowest figure since 2019. The number of financing rounds also declined, large deals were almost absent, and early-stage funding hit a five-year low. Particularly alarming: both international and domestic investors are pulling back. State Secretary Elisabeth Zehetner made clear that the fund should serve two functions: as an economic policy instrument to drive growth and innovation in the country, and as an attractive investment vehicle for capital providers.
International reference models
Austria can only catch up internationally if it achieves both. The EcoAustria study expected in September analyzes international fund-of-funds structures. While the United States relies heavily on private capital, Europe is dominated by public-private partnerships. Germany is seen as a role model with KfW Capital: the fund volume there is set to reach around €13.6 billion by 2030. Denmark, by contrast, has taken an entirely private route. For Austria it is clear: a purely state-run vehicle will not be enough, nor will a purely private model. Success depends on combining both worlds.
Success factors for the Red-White-Red fund-of-funds
Several factors are crucial for the fund to have impact. First, fund management must be independent and internationally experienced to build trust and operate professionally. Second, the capital base must be broad enough to sustainably strengthen not only seed stages but also Series A and B. Third, there must be clear guidelines for institutional investors such as insurers and provident funds, and, of course, tax incentives for business angels and private investors. An attractive legal framework is indispensable. The initiative must also be accompanied by the removal of regulatory hurdles and targeted support for strategic sectors such as ClimateTech.
From signal to lever
The Red-White-Red fund-of-funds is more than a political signal—it can become a central lever for advancing Austria’s start-up ecosystem. But on its own, it won’t suffice. It must be part of a broader strategy that strengthens early-stage financing, involves international capital providers, and provides targeted support for future-oriented industries. This requires a professional setup, consistent involvement of private investors, and complementary reforms. Austria now has the opportunity to reposition itself in international competition. Whether that opportunity is seized will be decided in the coming months.
Original contribution: Guest commentary by Dr. Susanne Lederer-Pabst in Börse Social Magazine #104_Issue 08/2025.