Think strategically to sustain creative start-ups in the new coronavirus era

03-Jun-2020 Intellasia | JapanNews | 6:02 AM Print This Post

Due to the spread of the new coronavirus, start-up companies have fallen into difficulties. Strategic support from the government, large companies and others is needed to prevent the extinction of technological innovation and the creation of new businesses.

Many start-ups that have just launched their businesses are in the red. It is difficult for them to obtain ordinary bank loans, and their operating funds are mainly financed by loans from government-affiliated financial institutions and investments from investment funds, large companies and other entities.

But because of the influence of the new coronavirus, the environment in which they procure funds has suddenly become difficult. This is because funds that are concerned about sluggish markets and large companies whose core business performance is deteriorating have become cautious.

A situation should be avoided in which promising companies with superior technologies cannot make prior investments and go bankrupt one after another due to a shortage of funds.

Government support for start-ups has lagged behind.

In May, the government launched a system to sustain the businesses of small and midsize companies, in which a cash benefit of up to JPY 2 million is distributed to them. Because an initial requirement for eligibility was sales being halved from the previous year, companies that have just started up were not able to receive the benefits.

The government made start-ups eligible for additional economic measures incorporated in the second supplementary budget. But it is urgent to rescue start-ups with insufficient funds on hand. The government should make efforts to promptly provide benefits to them.

In the second supplementary budget, the government will come out with measures to strengthen the capital of companies, including start-up companies. The move is aimed at stabilising the companies’ financial bases and making it easier for them to raise funds. It is hoped that the measures will lead to effective support through careful examination of the businesses’ potential.

Original ideas and technologies are indispensable for promoting social change in line with a “new way of life.” In order to prevent the spread of infections and also resume economic activities, the presence of start-ups is becoming more important.

Some new businesses have already been expanding. They include medical services in which advice on advanced treatments can be remotely provided online, and educational services that deliver digital materials.

To avoid crowding, a service has appeared that provides smartphone users with information on the crowd situations at restaurants and commercial facilities. Some businesses are also emerging that identify sales challenges related to teleworking.

If the creation of such new businesses increases, it is expected to lead to the creation of new jobs. The government also needs to exercise wisdom to support businesses that lead to the coexistence with the coronavirus.

With the promotion of digitisation, there has been a growing momentum for large companies to expect close cooperation with start-ups. This trend should not be terminated by a temporary economic downturn. Large companies and funds need to make investment judgments from a long-term perspective.


Category: Japan

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