Within a decade a paradigm shift in the funding of German universities has taken place: autonomy, competition and performance criteria now take center stage. Steering efforts of governments shifted from regulatory interventions to financial incentive systems. Nevertheless, the German funding model is not independent from its context – on the contrary, it is determined by certain factors that are described. This article also introduces major funding instruments for federal and state governments and shows how public funding instruments in Germany try to balance three major purposes. Furthermore, it points out that these tools have a common ground and offers an overview on the three typical pillars of funding models (basic, performance-oriented and innovation-/profile-oriented). They can be combined in different ways. To conclude, the articles highlights several lessons learnt.