The French government has announced a sweeping plan worth $4.3 billion to support a startup ecosystem struggling to survive the coronavirus pandemic that has shut down the nation’s economy.
Over the past five years, the French government had gone to extraordinary lengths to catalyze a startup economy that seemed moribund just a few years ago. Those efforts had paid off as the country surged to the top ranks of European startup hubs, but the bulk of those companies remain early stage and financially fragile.
To keep them afloat, French Digital Minister Cedric O detailed a financial rescue plan today during an interview with a French radio station.
“This morning, we’re announcing a specific plan to support the cash flow of start-ups,” he said.
J'annonce aujourd'hui un plan de 4Md€ avec @Bpifrance et @SGPI_avenir pour soutenir la trésorerie de nos #startup en cette période de crise. @LaFrenchTech est un pilier de notre économie et de nos emplois. Avec @BrunoLeMaire nous mettons en place un soutien adapté à leur modèle.
— Cédric O (@cedric_o) March 25, 2020
In the interview, he noted that many of these startups are not producing revenue. To help them stay afloat, the plan includes facilitating short-term refinancing, the early return of some tax credits, speeding up some previously planned investments, and some guarantees for lost cash flow. The government is still working out the full details in terms of criteria for which companies will specifically qualify.
If there is one upside at the moment, the state-run bank Bpifrance is one of the largest backers of startups in terms of investment. The digital minister said Bpifrance will continue to invest more than $1 billion in funds it had already had in the pipeline.
The announcement by O came one day after his boss, French Economic Minister Bruno Le Maire, unveiled a massive financial plan aimed at offering relief to businesses and individuals.
“The crisis we are facing, because it affects the real economy, because it is global . . . can only be compared to the Great Depression of 1929,” Le Maire said, according to The Washington Post.
In general, Western governments are considering unprecedented financial programs to support their economies. This includes the $2 trillion package U.S. lawmakers hammered out yesterday, as well as programs across Europe to assume responsibility for directly paying salaries of private business employees.
In terms of startups, the question of their near-term future has been posed from China to the U.S. There are varying reports of whether venture capitalists are pulling back or not. But already, big companies like Facebook, Apple, and Twitter have been severely impacted though they have enough money banked to ride things out.