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covid-19 wage subsidy scheme extended to help certain pre-revenue NZ startups

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Last week’s Budget introduced additional funding of up to $3.2 billion for certain businesses via an eight-week extension of the wage subsidy scheme that was originally set to end on June 9.

The extension is available to all Kiwi companies subject to meeting the eligibility criteria, including startups and high growth businesses. To be eligible for the extension, businesses must have experienced a revenue loss of at least 50% for the 30 days before applying, compared to the closest period last year. In comparison, the original wage subsidy scheme only required a 30% revenue drop.

What’s also new is that pre-revenue R&D startups that are recognised by Callaghan Innovation will also be eligible for the extension. This inclusion could be beneficial, albeit for a limited number of companies.

how do pre-revenue startups qualify?

Pre-revenue R&D startups impacted by Covid-19 will be able to treat a fall in projected capital income as a fall in revenue for the eligibility criteria of the scheme. These employers must:

  • be research and development intensive ‘startup’ businesses
  • be ‘seed’ or ‘venture’ backed
  • be Callaghan Innovation affiliated as of 17 March 2020; and
  • have no other revenue other than government support and seed or venture capital.

notes for high growth businesses

For high growth businesses applying to receive the benefit of the scheme, they would meet the eligibility criteria for the subsidy if their business has experienced a minimum 30% (for the original wage subsidy) or 50% (for the extension) decline in actual or predicted revenue over the period of a month when compared to:

  • the same month last year, or
  • a reasonably equivalent month for a high growth business that has experienced a significant increase in revenue, and that revenue loss is attributable to the Covid-19 outbreak.

This mean startups who were flying pre-Covid do not need to look back 12 months to assess whether they are eligible. Rather they can compare against a more recent period.  This is particularly useful for startups who often scale fast in short periods and for whom a year-on-year comparison is unfair.

what comes next

As our recent survey on startups impacted by Covid-19 indicated, a majority of Kiwi startups have seen their revenue significantly impacted by Covid-19. Whilst these measures may help business retain employees in the short term, many will still need to raise capital in the next 3-6 months to survive. Or as a minimum, businesses and teams are likely to shrink in size.Are you a Kiwi startup considering raising capital? Explore our list of active NZ investors in technology companies.

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