Start-Ups in the Corona Crisis
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Start-Ups in the Corona Crisis

Start-ups are multiple affected during the crisis: As with many other companies, sales collapse, venture capitalists secure their liquidity and the market is revalued. In addition, the introduce aid measures do not work for many start-ups. We analyse the situation of start-ups in the Corona crisis for you.

Founders who are in a growth or research phase are not yet generating sales and are making losses. These start-up losses are financed by venture capitalists. If the investors withdraw, the needed liquidity is lacking – in the worst case, there is a threat of bankruptcy.

Start-ups in the Corona crisis: Why do the government measures implemented rarely help?

A large part of the aid measures implemented are not effective in many start-up companies. The emergency aid provided by most of the federal states is linked to the collapse of sales or the official closure of companies. Companies that are in the research phase usually do not yet generate sales and therefore do not meet the required conditions for emergency aid.

Even the reduction of tax prepayments or the refund of special VAT prepayments are usually no help for such companies in this phase of the current crisis. Due to the typical loss situation of a start-up in the growth phase, no taxes are yet payable.

The situation is similar with KfW’s aid (Kreditanstalt für Wiederaufbau), since the use of this aid requires a three-year existence on the market. Start-ups only receive a loan if a bank bears the full risk.

What are the politicians doing?

According to Tankred Schipanski, the digital-political representative for the CDU/CSU parliamentary group in the German Parliament (Bundestag), the government is working on an amendment to the law on the Corona protection shield.

According to this draft, start-ups in the growth phase should also be able to submit applications to the Economic Stabilisation Fund (Wirtschaftsstabilisierungsfund). However, this possibility will only be available to companies that have been evaluated by private investors in financing rounds with an enterprise value of at least 50 million euros.

Our assessment

Should your company be affected by a decrease in sales due to the Corona crisis, two of the current measures can be considered:

  • Reduced working compensation and
  • The deferral of social security contributions.

Our team will be happy to help you with the examination and a possible application.

Companies with valuations in excess of € 50 million should keep an eye on the possibility of applying to the Economic Stabilization Fund. It is to be hoped that the Federal Government will significantly reduce the requirements.

We will keep you updated on current developments affecting start-ups in the Corona crisis!

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