4 ways governments can support start-ups and save their economies

Without startups like Zoom, WhatsApp, and Slack, the world would probably be less productive today, or worse, lonelier. Thanks to the technology these companies created – all founded shortly after the Great Recession of 2008 – we are able to stay in touch with family, friends, and co-workers despite being sequestered at home. Legislators can still work during the pandemic, and the global economy, while anemic, is trudging along.

As all this shows, entrepreneurs and the companies they build are essential to revitalize our economies—which is why government leaders must take action to protect them.

The current crisis has put start-ups and start-up ecosystems everywhere in mortal danger. They are running out of cash and watching venture capital dry out. Teams working on cutting edge technology are being disbanded, and customer demand is waning, in part because COVID-19 has rendered entire industries inoperable.

Decisive policy action is needed to avoid a catastrophe; 61% of start-ups globally are counting on it. If they are not already expecting that an existing policy will vitally support their business (45%), they are expecting that one will launch very soon (16%).

Government leaders: You have spent far too much time and invested far too many resources into your start-up ecosystem to watch COVID-19 destroy it. Don’t kill your start-ups and scale-ups, instead listen carefully to their needs and act firmly.

Here are the top four policy actions they require from you today, ranked in order of priority.

 
Direct grants and zero-interest loans

Cash is the number one concern for start-ups right now. Grants are considered the most helpful policy instrument they could ask for (29%), followed by loans (12%).

Money is running out. A significant number of start-ups are in what we call the “red zone,” with 41% having three months or less of cash runway left. Many young start-ups live with only a few months of cash at a time – 29% were in this situation pre-pandemic – but since December, the crisis has landed 40% more in this precarious state. Even start-ups that have raised Series A, B, or later rounds are at risk, with 34% having less than six months of runway left.

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Πηγή: weforum.org