Venture Capital: Call for UK Government to Support Startups During the Coronavirus Crisis
Leading tech luminaries back the “Save our Startups” campaign.
The Save Our Startups (SOS) campaign launched in the UK on Sunday. It aims to mobilize financial support for the 30,000 startups and high-growth businesses in the country. The government’s Coronavirus Business Interruption Loan Scheme (CBILS) may not cover many of these businesses. (Sifted)
The CBILS will provide financial support to small and medium-sized business firms (SMBs) during the pandemic. However, a large number of startups may not qualify as they have not yet reached the stage of profitability.
A large number of prominent tech personalities vouched for the campaign.
Top 10 supporters of Save our Startups:
Save Our Startups – Open Letter
Save our Startups is petitioning Boris Johnson, Prime Minister of the UK, to provide financial support to the country’s startup enterprises through the COVID-19 health crisis.
In an open letter, the campaign claims “today’s entrepreneurs are being forgotten during the COVID-19 crisis, which threatens their existence.”
The letter says nearly 30,000 startups and high-growth businesses in the UK employ about 330,000 persons. These people may lose their livelihoods if the startups do not receive assistance during the pandemic.
“These businesses are making a huge contribution to the economy but are often yet to make a profit. That’s because they are investing in their people, technology and bringing innovative products and services to market.”
“They are highly unlikely to qualify for the Coronavirus Business Interruption Loan Scheme (CBILS), which was introduced to provide financial support for SMEs during this pandemic.”
French and German support for startups
The Save our Startups open letter pointed out the French and German governments have been quick off the mark in providing support packages for startups.
The French government has announced a package worth $4.3 billion to support a startup ecosystem struggling to survive the COVID-19 pandemic. The plan notes that startups do not have revenue streams. Hence, the plan will provide short-term refinancing, the expeditious refund of some tax credits, accelerating previously committed investments, and certain guarantees for lost cash flow.
Germany too will assist startups hit by the pandemic with short-term financial assistance worth around $2.2 billion. “For these young, innovative companies, classic credit instruments are often not suitable,” said Economy Minister Peter Altmaier, as reported by Bloomberg. “So we’re allocating 2 billion euros to expand venture capital so that financing rounds for innovative German startups can still take place.”
Save Our Startups demands a three-pronged assistance package
To help startups through the crisis, the open letter requests the Government to:
- Provide an equity-based liquidity package
- Prioritize payments to startups from public funding schemes, such as for R&D tax credits and Innovate UK funding grants
- Simplify and alter rules for the existing Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT) schemes for the duration of the health crisis
At the time of writing, the petition had received 1,800+ signatures.
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