Special help for Crypto start-ups

There are many start-ups in the canton of Zug – particularly in the field of blockchain technology and crypto-currencies. Many of these start-ups could fall through the financial safety net that the Federal Government and the canton of Zug have created to combat the effects of the Corona crisis. Zug finance director Heinz Tännler wants to prevent this. Together with the cantons, the Confederation intends to provide CHF 154 million to help start-ups. The Zug Finance Office will request the Government Council to participate in the federal programme. Tännler also proposes to link the federal aid with the establishment of a foundation in the canton of Zug.

According to a report in the Sunday Times last weekend regarding an as-yet unpublished survey, 73% of the 50 largest companies included in the Zug Crypto Valley said that they were affected by the Corona crisis. 63% said their business outlook didn't look rosy, and at 35% said that the financial situation had deteriorated. A majority of companies have cut their budgets in response to the crisis, with 53% of them applying for short-time work, according to the Sunday Times. In addition, nearly one in five companies in Crypto Valley would have announced layoffs. 42% have contacted the federal government for a Covid 19 loan, but some individual applications had been rejected. The Zug finance director Heinz Tännler is concerned about the situation in which the crypto-start-ups now find themselves. It is clear that some companies are unlikely to survive the current tense period. One in three companies in Crypto Valley expects that they can only survive for about half a year on their reserves.

Investing in companies that can survive
The situation is drastic, and finance director Tännler is convinced that it’s high time to react. "For the most innovative country in the world, start-ups are an important part of our economy. That's why we're not just talking about aid, but also about major investment in future-oriented innovations," says Tännler. For him, the federal government's proposal, together with the cantons, to provide CHF 154 million for start-ups is a move in the right direction. But this aid will not be enough, the finance director is convinced, and he is thereby making a proposal on how aid can be accordingly expanded and increased.

Involving private investors
"The canton could launch a foundation that can pick up the momentum of this first step, and invest in the most promising start-ups through convertible loans. On the one hand, the public sector will benefit financially if some of these start-ups get off to a good start and succeed. On the other hand, this kind of approach, in which funds are not distributed as loans and guarantees as ‘fonds perdu’, is of interest to private investors, who could join in a further step," says Heinz Tännler. They could invest in those start-ups that have a high chance of surviving. This makes more sense than having the public authorities distribute loans or guarantees to all start-ups according to the random scatter principle. "Including those that won't survive anyway." The investments are forward-looking and aim to strengthen the innovation location Zug and the Crypto Valley as a global flagship of the start-up scene.

According to the ‘Sonntagszeitung’ newspaper, the foundation should have a volume of around CHF 100 million. Between CHF 20 and 30 million would be contributed by the canton and the City of Zug – as the central point of the Crypto Valley – and a further CHF 10 to 15 million would be transferred to the fund through the federal guarantees, with the remaining CHF 50 million being available for private participation. The Federal Government is holding discussions with the relevant authorities in this regard.