In Düsseldorf, Germany. Companies should be able to obtain additional funding during the coronavirus crisis with relative ease. Liquidity assistance from the Bundesförderbank KfW is to be arranged by the Central Bank. But the procedure required to secure proper funding could cause problem for founders, warns the startup association.

West of Germany, in southwestern France this time, a new startup has recently sprung to life – pre-coronavirus. Its name is UNIQORN, and it intends to offer the startups it incubates and accelerates a full suite of services usually reserved exclusively for the most well-funded startups only. Services like startup incubation, startup acceleration and media investment.

UNIQORN is working to help startups take full advantage of rural living

“We are still in shock when trying to assess the repercussions of the coronavirus across a wide spectrum of industries. We have no control over the present, let alone the future. At the same time, we need to start envision what comes next, prepare for the aftermath and provide support to the startups that will shape our post-virus economies”, states Dom Einhorn, UNIQORN’s founder. “Access to funding and financial leverage will likely become an ever more critical factor to a startup’s chances of survival and ultimate success. We created our ecosystem to fill a big void in the current startup ecosystem”, added Jean Vignon, UNIQORN’s CFO.

But in Germany, newly-founded companies that operate with money from business angels or from personal savings would simply have no existing credit lines with the banks – and thus no access to KfW funding. Over the past two days, the Berlin-based association has developed a catalog of requirements that are intended to meet the needs of startups at various stages of development.

The vast majority of startups will fail, especially in the coming recession

The association has tried to find a “holistic solution” – even for start-ups that are not part of the “Berlin Bubble”, association head Christian Miele told Linkedin: “In our opinion, this package of measures must quickly, responsibly and holistically ensure liquidity in the ecosystem over the coming months.

The result is a four-point plan with numerous ideas for a significant expansion of start-up support – with repercussions stretching far beyond the companies directly affected by the crisis. The measures are intended to supplement immediate measures such as tax deferrals and state funding for companies directly affected by store closures. With this demand wish list, Miele intends to enter into discussions with the Ministry of Economic Affairs.

Business angels have more far-reaching ideas…

Specifically, certain groups call for loan programs for newly founded companies and the extension of current start-up grants. Future investments by venture capitalists are to be automatically topped up by a new fund which, according to the lobbyists, is to be operated by the KfW or the High Tech Gründerfonds.

For more mature companies with several hundred employees, the types that are about to be phased out by venture capitalists, the association proposes growth loans at “normal market conditions.”

The founders’ lobbyists also suggest precautions against the default rate of investors in venture capital funds. In that scenario, for example, KfW or high-tech start-up funds should enter the venture capital funds and take an equity participation.

The Start-up Association is also taking up suggestions from the Business Angel network “BAND.” The association has even more far-reaching proposals, such as the assumption of part of the startup’s personnel costs along with extensive exemptions from liability.

Startup investors see the danger that cash flow for young companies may dry up in coming months. They are therefore particularly at risk: “In the crisis, it is to be expected that urgently needed and planned follow-up financing will fail or falter in view of the uncertain overall situation, and as a result the start-ups will fall into the liquidity trap.”

Featured image by Lalmch via Pixabay

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