Call for EU state support rules to flex for startups

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European startups are requesting for more flexibility in EU state aid rules to support national governments to give liquidity for the region’s fledgeling digital businesses during the COVID-19 crisis.

In a joint letter directed to Commission EVP Margrethe Vestager, more than a dozen startup associations from across the alliance have called for rules to be adjusted to ensure digital businesses are not prevented from receiving any emergency state aid.

In March the Commission implemented an update to EU state aid rules explaining how the Member States can give support to homegrown businesses during the coronavirus emergency.

However the startup association delegates co-signing the latter — which include reps from Coadec in the UK, France Digitale, Germany’s Bundesverband Deutsche Startups, Startup Poland and numerous others — are concerned the structure is being too narrowly drawn where digital upstarts are concerned.

They point out that startups may be purposely operating at a loss as a calculated bet on gaining scale down the line, delivering the current rules a poor fit.

“Startups around Europe report that the Temporary Framework for State Aid is not yet giving enough flexibility to the Member States to assist startup ecosystems”

“Only taking the current cash flow into record belittles the economic potential of these startups and prevents them from receiving much-needed support. In doing so, it can undermine the post-COVID-19 improvement, as it is today’s loss-making startups which will be the driver for economic and job growth in the future.”

The letter moves on to call for startups to “receive the support that other economic actors are also receiving”.

A number of EU Member States have placed out major aid programs for startups to date — such as France’s $4.3BN liquidity assistance plan, declared in March; and a match fund declared last month in the UK (which remains an EU member until the end of this year).