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Federal government supports start-ups in the crisis
14. April 2020
The German government is supporting start-ups in the crisis with a two billion euro package. We analyse the measures for you.
At the beginning of the week we had pointed out the critical situation for start-ups in the Corona crisis. In the case of many start-ups, the measures introduced did not work. According to estimates by the Federal Association of German Start-Ups, there are approximately 9,000 young companies in Germany, providing 150,000 jobs. They are particularly affected by the crisis, especially in times of stagnation young companies have to fear for their existence.
Now the German government has acknowledged the problem and implemented changes.
Measures for start-ups complement existing aid
The Federal Government’s measures complement the already existing package of measures, which in so far were not tailored to the needs of start-ups.
After all, founders in growth phases usually do not yet generate sales or are in a loss-making in the start-up phase. As a result, classic credit instruments are not effective. The current measures are designed to remedy this situation.
Overview of start-up aid measures
The package of measures of the Federal Government implements measures of three elements:
Public venture capital investors at the fund of funds and fund level are to receive short-term public funds which they can use in co-investment together with private investors for financing rounds of start-ups.
The fund of funds investors KfW Capital and the European Investment Fund are to be put in a position to take over shares from defaulting fund investors with additional public funds.
For young start-ups without venture capitalists among the shareholders and small medium-sized companies, financing with venture capital and equity substitutes is to be facilitated.
Measures as part of a larger „future fund“
As mentioned above, the Federal Government is providing 2 billion euros for the measures. However, this is only to be a first tranche. Apparently, the federal government is planning a 10 billion euro „future fund“ to help larger start-ups with financing.
In principle, it is good that the Federal Government has recognised that the start-up scene has fallen by the wayside with the aid packages that were originally put together. The measures are going in the right direction.
However, they are still too vague in their concrete form. We expect some improvements here. We will keep you informed and encourage you to contact our team of experts at any time if you have any questions.