Covid-19: France launches a €4 bn plan to support its start-ups
Acknowledging that the start-up development model is very vulnerable to disruption in the economy, the Government has launched a €4 bn aid package to prop up the French start-up ecosystem. Under the supervision of the French Ministry of the Economy and Finance, Bpifrance, and the National Investment Agency, this program is designed to support and protect the future French unicorns from any disruption in their funding process.
French start-ups have been very agile in the crisis
As a reminder, French start-ups have raised €5 bn in 2019, an absolute record in the history of the French Tech. They also have created 25,000 new jobs in the same period, which accounts for 10% of net job creations in France.
Start-ups are among those who best anticipated the impact of the Covid-19 epidemic. Home office, the adjustment in their offer, the opening of their innovative services to alleviate the crisis in sectors like health, education or cooperative tools, they have multiplied the actions to adapt to the new context.
But whatever their agility and capacity to adapt, the current crisis risks plunging many of them into bankruptcy. A situation that the French Government wants to avoid at all costs.
France will not let its start-ups down
On the 25/03, Cedric O, the French digital minister, announced the launch of a €4 bn plan to support the thriving start-up ecosystem during the Covid-19 crisis. Since 2017, the Government has invested a lot in French start-ups with initiatives such as La French Tech, with the objective to see the rise of multiple unicorns in the next few years. In the Covid-19 pandemic situation, the hypergrowth model of start-ups and their need for consequent funding put them at risk of bankruptcy. It was thus decided that dedicated support from the State should help them to withstand the passing storm.
4 key measures to support the liquidity of start-ups
- As start-up funding relies on fund-raising rounds, they are particularly vulnerable to disruption in the normal activity of venture capital and private equity funds. That is why the Government has dedicated an €80 M package to financing the bridges between rounds. This package will come as a co-financing tool with private investors; thus, it will reach €160 M of total investment in the ecosystem.
- One of the overarching measures for the economy is the creation of state-guaranteed treasury loans for companies affected by the pandemic. Start-ups will benefit from dedicated measures built into that plan to address their specific needs, meaning up to twice the 2019 wage bill for France or, if higher, 25% of the annual revenue. The State guarantee backed by Bpifrance, the reference public actor for start-up funding, should represent a total of almost €2 bn.
- Corporate tax credit are among the main funding tools available for start-ups settling in France, especially to foster for innovation and R&D. The Government shall accelerate the refund of corporate tax credits refundable in 2020, including the Research Tax Credit (CIR) for the year 2019, and VAT credits. These credits should reach €1,5 bn.
- Accelerated paiment of the PIA innovation support grants already allocated to promising start-ups and SMEs in targeted fields like deep tech of cybersecurity. They will reach a total amount of €250 M.
Finally, the State maintains, through Bpifrance, its support for innovative companies with nearly €1.3 bn planned for 2020 such as grants, repayable advances, loans, etc. Bpifrance will also continue its direct equity investments and investments in fund of funds, alongside private investors.
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