COVID-19: Germany's Federal Government announces Start-Up aid-programmes

On 1 April 2020, the Federal Ministry of Finance alongside the Federal Ministry for Economic Affairs and Energy have announced a tailored start-up aid programme worth EUR 2 billion, to combat COVID-19 related recession.

Federal Minister for Economic Affairs and Energy, Peter Altmaier stated that in many cases, regular credit instruments would not fit small innovative start-ups. Therefore, the federal government will introduce a Corona-support to boost innovative technology businesses and SMEs in addition to other state aid measures already in place.

The new programme is supplementing the existing COVID-19 related aid-programmes, for which start-ups are still eligible to apply. Additionally, venture capital financing is set to be expanded to facilitate the continuation of financing rounds for promising innovative start-ups from Germany, with the goal to secure jobs and innovation in Germany.

The set of measures includes the following elements which will be implemented gradually (implementation periods still pending):

  • Public venture capital umbrella-fund-investors (e.g. KfW Capital, European Investment Fund (“EIF”)) will be provided with additional public funds in the short term which can be used in co-investment with private investors for financing rounds of start-ups.

  • KfW Capital and EIF are to be put in a position to take over shares from defaulting fund investors with additional public funds.

  • For young start-ups without venture capitalists among their shareholders and small SMEs, financing with venture capital and equity substitutes will be simplified.

Parallel to the implementation of the announced measures, the German Federal Government continues to adapt the structure of the future Fund for Start-ups (total value EUR 10 billion) in order to pave the way out of the crisis in a timely reasonable manner.

Written with the kind assistance of Silan Lönnecker

Last reviewed: 02 April 2020

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