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Start-Ups Must Be Saved from Collapsing by EU Chief

European tech industry groups are improving their lobbying efforts to assure the EEU supports start-ups hit hard by the coronavirus outbreak.

Based on the joint letter to European Commission President Ursula von der Leyen, a coalition of start-up communities called for the bloc’s chief to provide start-ups a central role in the solutions to the COVID-19 crisis.

The group, headed by Brussels-based Allied for Startups, warns of the impact an arriving economic downturn will have on the continent’s once fast-growing tech sector. Also, the pandemic has forced a lot of start-ups to reconsider their business model and chop-off costs as sales began to dry up.

In the letter, the industry leaders explained that the crisis could also be an opportunity as with preceding disasters. In the first instance, it is a chance for better cooperation and coordination among nations.

Above all, this could also be a chance for innovation. This is when searching for solutions to fight and resolve the COVID-19 outbreak. And when looking for the root of growth opportunities after the economic downturn. With this, start-ups are the key factors in both equations, according to the leaders.

Then, it comes following the announcement of France and Germany about giving billions of euros in emergency aid to their start-ups. Meanwhile, in Britain, the government of Prime Minister Boris Johnson is recently facing calls to take the same action.

 

Liquidity Crisis

To avoid the fall of start-ups, the joint letter suggests the EU fast-tracks public funding to firms developing tech to combat the pandemic, halt some tax deadlines, and give financial assistance to already-planned investment deals.

The co-signatories noted, “We hope that you will ensure that startup communities will not be left alone and run into an avoidable liquidity crisis in the near future.”

They also stated that these start-ups pour their resources into growth involving new markets, headcount, and marketing. With this, they inherently have less liquidity than other players within the economy.

Aside from that, Europe showed one more record of the year venture capital funding in 2019. This rakes in more than $30 billion in investment, based on the multiple data trackers. The region has generated some of the most valuable ‘unicorn’ companies in the world. These are private tech firms with a valuation of $1 billion or more, including Revolut, Klarna, and TransferWise.

However, there are several concerns 2020 start-up financing the COVID-19outbreak could sharply hit. And a number of founders are gearing up saying that they have seen financing rounds pulled because of virus-related panic.

In the figures seen in Pitchbook, the number of venture deals in the top 10 European countries nearly halved in the first quarter of 2020 to 692. A year earlier, it was in 1,363. Also, the total amount invested plummeted by 8% to $8,031 to $7,391.

Now, the EU has already revealed a raft of fiscal measures aimed at addressing the ongoing crisis. It proposed 100 billion euro or $108 billion funds to tackle unemployment in some of the worst-hit countries. As well as a 37-billion-euro stimulus package to help businesses.

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