At the start of this century, an investor who flew in from Mars could well bet big that Germany would be one of the winners of the internet revolution.. Filled with the world's top engineers, friendly bankers, and nimble entrepreneurs, the country looked well-placed to transfer its hardware prowess to software.. But everything turned out differently. At least one critical element is missing when it comes to turning smart startup ideas into a global digital business, according to two recent reports: growth capital, writes for the Financial Times John Thornhill, founder of European startup media Sifted.

Germany lags far behind the US, China and the UK in creating tech unicorns - start-ups worth more than $1 billion. Although there are many giant pension funds in the country, they allocate only a tiny fraction of their funds to venture capital, which provides most of the rocket fuel for startups.. Across Europe, 77 billion euros were invested in venture capital funds last year, much less than in the US - 188 billion euros. But even within Europe, Germany doesn't carry enough weight: As a share of GDP, venture capital investment in the country was just 0.25 percent last year, compared to 0.33 percent in Europe and 0.78 percent in the US..

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Does it matter? Germany continues to be a successful economy with a strong manufacturing base and a vibrant export sector. Moreover, the ability to create fast-growing but often unprofitable technological “unicorns” is hardly the best indicator of economic, much less social success.. Many Germans claim that Facebook, Airbnbs and Ubers of this world are destroying social values \u200b\u200band labor rights.

However, Germany can still create and control a much more powerful tech sector by adopting the financial virtues of the US and not copying its visible vices.. Much more growth capital needs to be mobilized to safeguard Germany's sovereignty and prosperity.

As noted in a report by the German Private Equity and Venture Capital Association and the Internet Economy Foundation, the German economic miracle of the 1950s and 1970s was largely driven by heavy investment in new companies and medium-sized enterprises - the famous Mittelstand. In those years, bank lending to this sector was 4 percent of GDP. But today the figure is only 1 percent. Germany still lives off the glory of its past and underinvests in the wonders of tomorrow.

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Even more troubling is that North American investors, who back both US and German venture capital firms, are investing more in German startups than the country's own pension funds.. This means that the center of gravity of the German economy could increasingly shift to the US, jeopardizing technological sovereignty.. "

Take Flix, a Munich-based startup that runs an international transportation platform.. US pension funds indirectly own about 12 percent of Flix shares, while their German counterparts own just 0.3 percent, according to an analysis by venture capital firm Redstone.. Overall, Redstone estimates that US pension funds own 10 percent of Germany's €47bn tech unicorns, while German pension funds own 0.2 percent.. "

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As an investor, Furstenberg says she's excited about the new crop of startups like Celonis, Personio and Vay, which show that world-class software companies can be built in Germany.. But she looks with admiration across the border to France, where the government is successfully mobilizing institutional investment for the tech sector..

The so-called Tibi initiative helped create new reserves of growth capital. "

Software engineers sometimes talk about " Europe has a chance to “Frankenstein” its start-up sector by combining the ingenuity of Germany (which has a third more patent applications per person than the US), the vigor of the early-stage investment scene in the UK, stimulated by the government, and the growing strength of France’s financial institutions.. The only difference from Mary Shelley's mythical tale is that this "