Germany’s $2.2 Billion Bailout for Startups Stuck by Who Pays Up
Germany’s $2.2 Billion Bailout for Startups Stuck by Who Pays Up
(Bloomberg) --
Germany has pledged 2 billion euros ($2.2 billion) to help its beleaguered startups, but the policy has stalled after the country’s governmental departments failed to agree on who has to pay.
More than two weeks after the aid plan has been announced, Germany’s finance and economy ministries are yet to find common ground over who is responsible for paying the short-term financial assistance, according to people familiar with the situation.
A spokesman for the economy ministry said both departments are working intensively on the package and details are still being worked out. A representative for the finance ministry declined to comment.
Earlier in April, Germany pledged to help startups affected by the fallout from the coronavirus. But the tussle between the ministries is causing a delay in quickly getting much needed capital to young companies with a short financial runway.
Berlin-based travel company GetYourGuide has requested state wage support for a number of its employees and is in discussions with German state-owned bank KfW about options for further state-aid, a person familiar with the matter said. A spokesman for GetYourGuide declined to comment.
Peter Thiel and Li Ka-shing-backed fintech startup N26 GmbH has also applied for state wage support for some of its employees. The bank fetched a valuation of $3.5 billion in July after raising $470 million from investors including Insight Venture Partners and Singapore’s sovereign wealth fund GIC Pte.
The German package for startups will include more government cash for venture capital investors and funds; KfW Capital and the European Investment Fund may be given extra money to take stakes that become available and young startups without venture capital backing should have easier access to financing.
Berlin has earmarked cash for those startups that may not be able to get the financial support they need from a wider package of measures the government launched in March, Finance Minister Olaf Scholz and Economy Minister Peter Altmaier told reporters on April 1.
When Scholz and Altmaier announced the 2 billion euros state aid plan, they already diverged on how it should be financed. Scholz said the money was part of the existing budget planning while Altmaier said it would come on top of the ministries budget allocation.
“It’s an ambitious target but we hope that we can still start in April to distribute the 2 billion allocated to help startups”, Thomas Jarzombek, Commissioner for the Digital Industry and Startups, said in a telephone call. “In the meantime the startups have access to other financial instruments such as state wage support, and rent relief, or emergency aid for small businesses”.
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