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Startup Support during Coronavirus Pandemic – GOED ID Brief (as of 05.18.20)Amidst the COVID-19 pandemic, many concerns have been raised in regards to the extent of its negative economic impact on startups and small businesses. As the availability of venture capital funding decreases in light of the coronavirus, many companies within the industry are subsequently facing bankruptcy. While governments have been introducing economic relief schemes for businesses at this time, many startups are unable to receive that support given their size or prior economic success disqualify them. This is despite the fact that startups especially rely on limited outsourced financing and reserves that likely will not be replenished as funders cancel or go silent on their investment commitments.France: France has been at the forefront of startup related support in Europe by announcing a €4 billion aid program to help preserve the business of its tech sector at this time. Their plan comes as part of the country’s €300 billion emergency package intended to help businesses and will be rolled out with the cooperation of Bpifrance, a public investment bank. The plan includes a €160 million short-term refinancing scheme, €1.5 billion worth of early tax credit payments, and €150 million worth of accelerated payments for investments in the sector that were planned prior to the outbreak. Additionally, the government will liquidate €2 billion for startups to borrow up to two years of payroll for employees based in France or a quarter of their annual revenue. Bpifrance is also to invest €80 million, which will be matched with another €80 million from private investors, in a new bridge funding round for startups that were in the process of new funding. Germany: Germany is committing €2 billion specifically towards financing its tech sector during the pandemic. This aid will be distributed through their “Special Start-up Support Program,” so to supplement the anticipated €10 billion “Future Fund” the German government had been in development for startup support prior to the coronavirus outbreak. The program will gradually implement the following measures:Public venture capital investors on fund and umbrella fund (Dachfonds) levels (e.g. KfW Capital, European Investment Fund, High-Tech Gründerfonds, coparion) will be provided with public funding in the short term that can be used for them to participate in financing rounds of startups in the framework of a co-investment together with private investors (so called “matching”). The public umbrella fund investors KfW Capital and the European Investment Fund (EIF) shall get enabled to take over shares from defaulting private investors. For small startups that are not yet funded by VC investors and for SMEs, the financing with venture capital and equity substituting forms of financing shall be facilitated.United Kingdom: In the United Kingdom, startup companies and the tech sector have been placing pressure on the government to follow the examples set by France and Germany in supporting the industry at this time. The UK government has so far pledged ?330 billion to an emergency fund intended to go towards small businesses in the form of loans and grants. This aid, however, cannot be accessed by tech startups especially because their consistent profits make them ineligible. In response, prominent companies and developers in the tech sector mobilized the “Save Our Startups” campaign urging the government to create a plan that will specifically support them.The UK government has since announced their “Future Fund” scheme to support startup companies during the pandemic. It is to launch in May and will remain open until the end of September 2020. They are allocating ?250 million to the fund and are looking to invest anywhere in between ?125,000 and ?5 million to eligible startup companies. More details about the scheme are as follows:Eligible businesses must be an unlisted UK registered company that has raised at least ?250,000 in aggregate from private third-party investors in precious funding rounds in the last five years and have a substantive economic presence in the UK. The government will make loans alongside other private third-party investors through unsecured bridge funding that will be no greater than 50% of the bridge funding being provided to the company overall. The bridge funding is to be used only for working capital purposes and cannot be allocated to other, unrelated business operations. The loan will mature after a maximum of 36 months and the government will receive a minimum of 8% per annum, non-compounding interest rate to be paid on its maturity. Netherlands: The Dutch government has established their own plan to support their startups during the pandemic. They allocated €100 million to their Corona Bridging Loan (COL), that was developed by the Ministry of Economic Affairs and Climate Policy, will be overseen by its Regional Development Companies. Startups, scaleups, and SMEs are eligible for loans will range from €50,000-€2 million with a fixed simple interest rate of 3%. Loans over €250,000 require 25% co-financing with existing investors or stakeholder and loans over €500,000 require the same plus have a 2% premium per year The loan terms are three years. Applications and information about this scheme can be accessed through an online portal by Techleap, a publicly funded nonprofit, that was developed specifically for startups support through the pandemic. The portal additionally provides: the Guide of COVID-19 Issues, expert consultations, details on online events, international support hours, a COVID-19 NL VC index with VC that are open for providing funding, and an overview of offers and support services from its corporate partners.Taiwan: In Taiwan, The National Development Council has announced its National Development Fund will invest in new ventures that have been especially affected by the virus. The government anticipates supporting approximately 3,000 startups under the fund's NT$560 billion budget. This program will provide 6-12 months of funding in exchange for preferred stock and startups from all sectors are eligible to apply. The government will purchase the stocks of startups that are “untraditional” businesses and have promising redemption methods.South Korea: The Seoul Metropolitan Government has established the Employment Maintain Subsidy with a budget of $16 million and looks to support 20,000 startups employees. In order to minimize unemployment, the subsidy that will provide up to $400 per person for struggling startups with less than five employees. The Seoul Business Agency will fund the Specially Targeted Business Accelerating Fund, which is looking to invest $12 million into 50 startups and will put a maximum of $240,000 into each selected company. Seoul will also extend the period for tax payments and tax returns for struggling startups and SMEs due to the coronavirus. As a measure to stimulate startup opportunities, South Korea has announced its "Meet Your Match Korea". This initiative is to be executed by the KK Fund and the Korea Venture Investment Corp, a governmental agency so to provide investor connections to Korean startups during the pandemic. Eligible startups that are accepted to the program will be matched to participating investors so to mitigate funding into the Korean startup ecosystem. Additionally, the Seoul Metropolitan Government has introduced The Seoul Global Challenge Project - a competition open to global startups to fund those in the urban tech sector that have been made economically vulnerable by the pandemic. Final Points: Funding for startups has been greatly confounded by the spread of the coronavirus, destabilizing these companies into vulnerable positions of bankruptcy. The responsibility of preserving startup companies is now falling on governments and their willingness to mitigate the impacts through their own money. Through maintaining startups’ liquidity through grants, loans, and deferring costs, payroll support, and other measures alleviates the investment uncertainty on an industry that is being hurt at large by the pandemic.Globally, 41% of startups are threatened because of the COVID-19 and Nevada is unfortunately not exempt from that statistic. Despite its growing startup identity, it is likely Nevadan startups will be deeply affected as the outbreak progresses. Startups need to be offered stability so that they can exist in the long-term. It is necessary that coworking spaces, innovation centers, incubation programs, and accelerators receive support during the pandemic so these companies can survive its damage.Fortunately, Nevada offers state-of-the-art coworking spaces such as UNR Innevation Center, Reno Collective and Adams Hub in the North and WeWork, Work in Progress, UNLV Blackfire Innovation and International Innovation Center in Las Vegas that host a considerable number of startups. E.g. the UNR IC supports new Nevadan companies by not only offering a place for startups to operate, but also provides them resources, logistical software, and classes to further their success and longevity. WeWork and other coworking spaces, however, have been especially impacted by the coronavirus. As occupancy and revenues decline in light of social distancing, but they have still accommodated to state’s lockdown policies by offering rent discounts and flexibility on leases. Although their tenants are currently transitioning to remote operations, they remain optimistic that their spaces will be utilized as things settle down. Therefore, GOED International Division launches a new project based on Nevada Global platform and focused on startup support institutions, co-working spaces, incubation and acceleration programs as well as selected startups which participated in NVG and STEP programs with the following goals: (1) to review their situation and effects resulted from COVID-19 disruptions, (2) to map current entities and actors of Nevada’s startup ecosystem, and (3) to project future trends and formulate recommendations how the eco-system should be supported and – at the same time – connected to international entrepreneurial ecosystems to ensure its recovery and further development. ................
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