German government announces 2 billion euros in aid for start-ups

Berlin (dpa) – Germany is setting aside 2 billion euros (2.2 billion dollars) in aid to help start-ups survive the coronavirus crisis, the finance and economy ministries in Berlin announced on Wednesday.

Finance Minister Olaf Scholz called the funding a “strong signal” that start-ups could also continue their work during the pandemic.

Economy Minister Peter Altmaier noted that Germany’s start-up scene has made a lot of progress in recent years and said this progress should not be lost.

The ministers noted that traditional financial aid was not always helpful for such companies.

For that reason, venture capital investors providing umbrella funds, such as Germany’s state-owned development bank KfW, are now to receive additional funding at short notice.

This is designed to be used in cooperation with private investors for start-up funding rounds.

In addition, lenders providing “fund of funds” (FOF) investment such as KfW Capital and the European Investment Fund are to be put in a position to take over shares from defaulting fund investors in the future with additional public resources.

Access to venture capital and other forms of equity-replacing financing is to be made easier for younger start-up firms without venture capitalist backing as well as small and medium-sized enterprises, under the emergency plans.

In parallel, the German government is also working to establish a 10-billion-euro start-up fund.

Start-ups are particularly vulnerable to the economic chaos unleashed by the coronavirus, with the Federal Association of German Start-ups noting that nine out of 10 young companies are feeling the effects of the pandemic.