The U.K. government has stepped in with aid for new businesses after many in the wider startup community feared a whole generation of brands could be lost because of the coronavirus crisis.
Startup companies and high-growth businesses are said to number about 30,000 in the U.K. alone, many of which have been struggling and forced to head into hibernation mode.
A
Save our Startups campaign
was launched at the beginning of April, with founding partners including Crowdcube, Founders Forum (led by ex-Lastminute.com co-founder and CEO Brent Hoberman) and Seedrs, countersigned by the founders and executives from prominent startups including Deliveroo and Net-a-porter.
The government has now pledged £250 million in a "Future Fund"
, which will provide loans of between £125,000 and £5 million to companies as long as it is matched by private investment.
Thomas Young co-founder and CEO of corporate travel technology startup Taptrip, believes the move is a positive first step but raises concerns about the many startups who will not meet the eligibility criteria of having raised £250,000 in the past five years.
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He adds that while he understands why the government has made this decision, the majority of startups will be prevented for accessing the funds. Young says he hope more will be done for these companies.
Countries such as Germany, which
pledged €2 billion
to help startups, and
France's €4 billion
rescue package, acted earlier.
Young says that Taptrip's own “cash conservation” measures, such as renegotiating its office lease with Huckle Tree, have enabled it to “extend its runway and invest in other areas,” putting it in a good position.
“We are okay but if we want to save this generation of startups, we need to do something," he says.
The government is believed to be putting together some sort of rescue package
- based around releasing private investment by offering to match it, according to reports.
But, not everyone agrees this is the right course. Robin Klein, a partner at venture capital firm Local Global, believes startups should not be bailed out.
In this piece
, he sets out the funding the tech sector has received in the U.K. as well as some of the realities of the startup failure rate.
Young says that for most startups, revenue has dropped substantially, staff have been furloughed and funding has dried up.
“The conversations we’re hearing are that investors are scared to invest in anything but particularly travel because it is higher risk. If you don’t have more than six months in the bank… Drastic measures are needed or we are going to lose a lot of travel startups.”
Taptrip, meanwhile, says it has seen a spike in demand. The company, which announced
investment from travel management company ATPI
in early February, has just taken on two software developers in preparation for a post-virus boom.
Young says TMCs are realizing they need to bring more of their business online.
Requests have come from travel managers across retailing, gambling and wider ecommerce companies who, adds Neil Ruth, Taptrip’s co-founder and chief commercial officer, are seeing the “limitations of working offline.”
Young says: “TMCs were coming to us before because they knew they had to change but now many are having to cut costs, are focused on keeping the lights on and not on innovation and that’s where we come in.”
As a result Taptrip says it is developing a suite of add-on products to offer its TMCs and plans to shake the dominance of the likes of Concur and Serko.
A new normal
Young believes travel will remain at pretty much zero until mid to late June and then increase to about 50% of what it was at the same time last year between July and the end of September or early October.
After that, he sees a boom in travel where “people need to get back to some sort of normality.
His caveat is however, already echoed by others in the industry, that there will be change in how people work in the long term.
“Remote working does work and now you don’t need to be in an office.”
He points to other benefits such as a wider recruitment pool given how efficient communication tools such as Zoom have proved themselves.
Ruth adds that there will be a balance to be struck between public health and the economy leading governments in different countries to make different decisions around “who can travel and where.”