Europe’s entrepreneurial sector has been asking, both national and European authorities, to approve a specific aid scheme to alleviate the economic impacts of COVID-19 and to solve the current inequality they are facing. Since all the measures adopted to help SMES and freelancers out such as liquidity, basic supplies guaranteed, moratoriums or extraordinary loans, are insufficient.
Open Letter to the European Institutions
All the European startups associations have signed an open letter delivered to the President of the European Commission, Ursula von der Leyen, on 3rd April. With a copy to the Presidents of the Council of Europe, the European Parliament and the European Central Bank, to ask for an increased support from these institutions in order to solve the crisis created by the COVID-19. Full Open Letter
The situation in Spain
The Spanish Startups Association have proposed to the Government concrete plans due to the impact of the COVID-19. A strong response is required to maintain the activity, liquidity, work of startups. Just as other EU Governments are doing.
Their proposals are:
- Immediate return (without verification, but subject to verification until prescription) of VAT’s pending
- Less strict requirements for monetization of R&D deductions in the State – Cash back.
- Reduction of the tax of corporate self-employed persons for at least 3 months or as long as the economic normality is recovered.
- Lessen both the grant and subscription process, as well as the repayment of loans and public credits.
- Acceleration of disbursement subject to subsequent verification in case of required accreditation or compliance with milestones (expenses incurred, invoice, etc.)
- Match (50% co-financing): The investment of current equity partners (investors or promoters) from 1 March to 30 June and up to an X limit of amount.
Investment advances made by investors from 1 March to 30 June as advances for ongoing operations, provided that at least 25% of the financing committed to offers or expressions of interest are covered (Letters of Intent, MoUs, Term Sheets or the like) signed before 1st March.
- Establishment in the Additional Provision Fourth (Disposición Adicional Cuarta) of the new Royal Decree 8/2020 of 17 March (suspension of the liberalization of foreign investment) of a threshold of size of the companies affected. Proposal: only to companies that quote on any stock market.
- Exclusion for technology-based companies meeting specific billing criteria or benefits to make space for startups (companies that do not have traditional economic ratios).
Miguel Vicente, president of the association Barcelona Tech City, representing more than a thousand companies in the Barcelona ecosystem, says: “we think we are not taken into account with either the measures nor the financial aid.” Moreover, he doubts the guarantees by the ICO will end up reaching the startups. The sector does not agree to veto the entrance of a non-EU companies with more than 10% of the capital of a Spanish company. “The measure stops international investments (especially from the United States) that benefits many startups. That makes sense for large companies, not for small, regrets Vicente. So that, he claims that the Government should take into account the specificities of the start-ups, when drafting the legislation. It also calls for more resources to be injected into help tools that already exist. Among the proposals to the Government are: to double the aid budget for CDTI, Enisa or ICO.
The situation in France
On the other hand, France is considered a leader in proactivity in terms of start-up support, the Government has already approved a liquidity plan with €4 billion to help refinance credits, close pending investment rounds and address some fiscal issues. In addition, they can turn to the PIA (Future Investment Program) and the BPI (Bank for International Settlements.) The PIA will finance, with private investors, €160 million to bridge financing between two fundraising events, it is up to the new companies ask for, between two rounds, an extension to investors. This programme, which takes the form of bonds with possible access to the applicant’s capital, is for new companies that were in the process of raising funds or that were required to make one in the coming months and have not been able to do so. The BPI, it is another measure supported by the guarantee of loans of €300 billion adopted in the amending financial law (ley financiera modificatoria.)
The situation in Germany
In the case of Germany, the Government is already prepared to begin the aid package supply based on an injection of €2,000 billion allocated to reflate technological businesses, what is not yet clear is which companies will eventually obtain the money and when. Part of the money will be allocated to larger start-ups financing through the venture capital fund division, with a state participation of up to 70%. The money will come from the German bank KfW. The other part of the money will go to smaller start-ups that cannot afford private funding, which will be allocated through regional development institutes, and will receive money from the federal government to supplement their existing programs.
Furthermore, they suggest creating a “future fund” from another 10 billion for larger startups that present problems in the following years. According to the Finance Minister, Olaf Sholz, and the Economy Minister, Peter Altmaier, the program is specifically designed for new companies that may not be able to get support they need from a broader package of measures that the government launched last week.
There are numerous complaints towards the programme, because one month after having announced the package, it is not yet clear neither which way nor when the wealth distribution will be carried out. According to the president of the German Digital Association of Bitkom, Achim Berg, this program is intended to provide the startups help. However, it still lacks urgency and structure. The German Association of Startups has also expressed its opinion on this, its president Christian Miele has declared that the aid will no longer work if it is implemented too late. Another problem, in this case for startups that are dependent on the counterpart fund, is that they cannot directly apply for the aid, i.e. they are dependent on their investors, so many startups are not stable or secure in financial terms when it comes to dealing with this crisis.
The situation in the UK
In the UK , new technology companies are pushing the government for a emergency aid package to help them soften the effects of the pandemic. The government launched a loan plan of £330 billion ($409 billion) and other aid measures to prevent the collapse of companies. But many of the country’s startups say they cannot access such financing. This is because they have to prove that they would be “feasible” businesses were it not for the disruption caused by COVID-19, which could block companies that focus more on growth than profits.
The situation in Australia
In Australia, the Australian Innovation Collective has made a “urgent and critical” request for government support adapted to high-growth technology companies in Australia. The request suggests broader structural changes to better support the industry, but first and foremost, it requires temporary measures to help keep startups alive in the future, since everyone is facing the economic recession caused by COVID-19. And while the government’s first two stimulus packages have been “fast and appropriate,” to recover the COVID-19 economic recession could be an opportunity to boost Australia’s innovation industry. They add that the stimulus to support new companies will have a “far-reaching impact“, with innovations that also support the health, agriculture, energy, defence and manufacturing sectors, among many others.
Sources: La Vanguardia, Asociación Startups, Bloomberg, CNBC, FR24 News, Smart Company, Linformaticien