April 30, 2020 / 11:30 AM / a month ago

Germany ready to release 2 bln euro fund to support start-ups

BERLIN, April 30 (Reuters) - Germany is ready to start delivering to start-ups state aid of 2 billion euros ($2.18 billion) that it promised at the beginning of this month but which had not yet been released, government officials said on Thursday.

The Finance and Economy ministries presented a joint plan on Thursday aimed at preventing venture capital financing rounds for young and innovative companies from failing and causing them to go bankrupt.

“We can start now,” one senior government official said of the 2-billion-euro funding pot, which Finance Minister Olaf Scholz and Economy Minister Peter Altmaier announced on April 1 to help support start-ups but which had not yet been accessible.

The release means start-ups can expect to receive the state funds in May.

A recent survey showed more than two-thirds of German start-ups fear for their survival as they struggle to operate in an environment of travel warnings and restrictions on public life.

Berlin wants to secure financing for larger start-ups by splitting funding with venture capitalists, generally 50-50 but with a state stake of up to a maximum 70%, government sources said.

The state investments would be made via specialist umbrella funds to ensure the state does not take excessive risks.

For smaller start-ups, regional development institutes would receive federal government money to top up their existing programmes, the sources said.

Start-ups generally have little chance of getting through banks’ review process loans as they usually have no reserves and rarely make a profit. As a result, they generally tap specialised public and private investors for funding to grow.

Last year, the start-up industry in Germany raised some 5-7 billion euros in equity capital.

In addition to the 2 billion euros in emergency aid, the government is planning a “future fund” for the coming years, which is to have a volume of 10 billion euros. State development bank KfW is working out the details. (Reporting by Christian Kraemer Writing by Paul Carrel Editing by Madeline Chambers)

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