Skip to main content

Tech Industry:Europe races to rescue its tech industry as start-ups fight for survival

Ryan Browne

GP: EU coronavirus 200402
In this photo illustration the European Union flag logo seen displayed on a smartphone with a computer model of the COVID-19 coronavirus on the background.
Budrul Chukrut | SOPA Images | LightRocket via Getty Images

European countries are racing to save their tech start-ups as the region faces an impending economic downturn because of the coronavirus crisis.
France has led the pack in the continent, launching a 4 billion euro ($4.4 billion) liquidity plan to support its start-ups’ cash flows. The package includes short-term refinancing, investment into already-planned funding rounds and early payment of some tax credits.
On Wednesday, the German government said it would provide 2 billion euros in financial assistance to help keep its young tech businesses afloat. It’s also considering a longer-term fund of 10 billion euros for bigger start-ups.
Together, Germany and France are the leaders within the EU when it comes to hosting the best-funded tech sectors. Last year saw both countries attract $7 billion and $5.2 billion in venture capital respectively, according to figures from Dealroom.
Across the continent, though, they are second and third to Britain, whose privately-held tech firms pulled in a record $13.2 billion in funding last year. The U.K., which is no longer an EU member but still adheres to its trade rules, is facing calls from its own tech industry to bail out start-ups that could collapse in the coming months without access to government support.
It comes amid massive disruption to economic activity caused by the COVID-19 pandemic, as the crisis wipes out revenues for a number of start-ups and puts venture capital investors on edge.
Though the British government has put an emergency loan scheme into place to support smaller businesses, some high-profile figures in the tech industry say many start-ups are effectively blocked from the program as they are not yet profitable.

‘Runway fund’

Pressure has built on governments across Europe to do more for hard-hit digital companies in recent days.
In the U.K., seven industry lobby groups have written a letter to Finance Minister Rishi Sunak calling for the creation of a £300 million ($373 million) fund to help them continue operating, according to Sky News.
The proposed “runway fund,” which was previously reported by CNBC, would allocate loans that then convert into equity stakes at a company’s next financing round. The idea has been backed by well-known industry groups as well as noted venture capitalist Brent Hoberman.
Meanwhile, Brussels-based lobby group Allied for Startups hopes it can convince the European Commission — the executive branch of the EU — to better coordinate start-up relief programs across the bloc.
“We’ve seen numerous financial ‘Bazookas’ being unloaded across Europe,” said Benedikt Blomeyer, director of EU policy at Allied for Startups. “Fundamentally we think a start-up shouldn’t be at a disadvantage because it is in Spain and not in France.”
Blomeyer added: “The European Commission can step up and help Member States target their bazookas effectively: sharing best practices, making sure resources are allocated smartly, with the best tools available.”
Start-ups have already been hit by fears of a coming recession. Natalie Cramp, CEO of U.K. data science firm Profusion, told CNBC she had been forced to put the brakes on funding talks, while other entrepreneurs have said they or their friends have seen investors pull out of deals due to valuation concerns.
Mark Tluszcz, CEO of Luxembourg-based Mangrove Capital Partners, said he expects start-ups in the food and transportation industries to take drastic cost-cutting measures to fight for survival. But he added that he tells all of his portfolio investments: “They need to live to fight another day.”


Popular posts from this blog

Analysis | The Cybersecurity 202: How the shutdown could make it harder for the government to retain cybersecurity talent

By Joseph Marks 13-17 minutes THE KEY President Trump delivers an address about border security amid a partial government shutdown on Jan. 8. (Carolyn Kaster/AP) The partial government shutdown that's now in its 18th day is putting key cyber policy priorities on hold and leaving vital operations to a bare bones staff. But the far greater long-term danger may be the blow to government cyber defenders' morale, former officials warn. With the prospect of better pay and greater job security in the private sector, more government cyber operators are likely to decamp to industry, those former officials tell me, and the smartest cybersecurity graduates will look to industry rather than government to hone their skills. That’s especially dangerous, they say, considering the government’s struggle to recruit and retain skilled workers amid a nationwide shortage of cybersecurity talent. About 20 percent of staffers are furloughed at the De

Democrats call for investigation into Trump’s iPhone use after a report that China is listening:Analysis | The Daily 202 I The Washington Post. By James Hohmann _________________________________________________________________________________ President Trump and Chinese President Xi Jinping visit the Great Hall of the People in Beijing last November. (Andrew Harnik/AP) With Breanne Deppisch and Joanie Greve THE BIG IDEA: If Democrats win the House in two weeks, it’s a safe bet that one of the oversight hearings they schedule for early next year would focus on President Trump’s use of unsecured cellphones. The matter would not likely be pursued with anywhere near the gusto that congressional Republicans investigated Hillary Clinton’s use of a private email server during her time as secretary of state. Leaders of the minority party have higher priorities . But Democratic lawmakers made clear Thursday morning that they will not ignore a New York Times report that Trump has refused to stop using iPhones in the White House, despite repeated warnings from U.S. intelligence offici

RTTNews: Morning Market Briefing.-Weekly Jobless Claims Edge Down To 444,000. May 13th 2010

Morning Market Briefing Thu May 13 09:01 2010   Commentary May 13, 2010 Stocks Poised For Lackluster Open Amid Mixed Market Sentiment - U.S. Commentary Stocks are on pace for a mixed start to Thursday's session, as a mostly upbeat jobs report continued to relieve the markets while some consternation regarding the European debt crisis remained on traders' minds. The major index futures are little changed, with the Dow futures down by 4 points. Full Article Economic News May 13, 2010 Weekly Jobless Claims Edge Down To 444,000 First-time claims for unemployment benefits showed another modest decrease in the week ended May 8th, according to a report released by the Labor Department on Thursday, although the number of claims exceeded estimates due to an upward revision to the previous week's data. Full Article May 13, 2010 Malaysia's Decade High Growth Triggers Policy Tightening Malaysia's economy grew at the fastest pace in a decade in