Tech startups, local newspapers in trouble due to coronavirus

After the hospitality and entertainment sectors, the coronavirus and measures taken to curb its spread are claiming more victims in the Netherlands' business world. Technology start ups and local and regional door-to-door newspapers are facing serious trouble.

Until Covid-19 arrived in the Netherlands, the number of new tech companies skyrocketed int he country. Many of these startups hardly have any financial buffers, but have to keep paying the rent, real estate advisor Savills said to BNR. An enormous amount of venture capital was pushed into tech startups, with investors looking for products with high return. So they invested in companies that aren't making profit yet, but might do so soon. 

This put many tech startups, most of whom have long-term leases, in a difficult position now that they have to bargain with their landlord, IJsbrand Brunger of Savills said to the broadcaster. "Some of the companies do not make profit and have no buffers. The focus is on growth, all the money is put back into the company." This means that if a landlord agrees to temporarily suspend or reduce their rent, the landlord risks never getting that money back. "The risk is extra high if the property that he rents out is still being paid off. Then the rental income is needed to pay off the financing," he explained. 

Local and regional door-to-door newspapers are also in a crisis situation now that advertising revenues have dropped to near zero, the Dutch association of journalists NVJ and the association for local and regional newspapers NNP said to NOS. These newspapers, magazines and publishers can no longer pay their freelancers and fear for their survival. They're calling on municipalities, provinces, and Minister Arie Slob, responsible for media, to help.

In addition to loss of revenue, newspaper companies are also dealing with arrear payments. "The cafe owner who just had to close his business will not look in his administration which bills he still has to pay," said Adri de Bruijn of Enter Media, publisher of local newspapers in the Gooi- en Vechtstreek and Diemen region. "The fixed costs, such as those of the printing company, will continue as normal. But the income will fall by dozens of percentage points. We can't keep it up longer than a few weeks."

Newspapers are very sensitive to fluctuations in the economy, NVJ chairman Thomas Bruning said to the broadcaster. "The government provides support to entrepreneurs who lost 20 percent of turnover. But for newspaper companies, 10 percent of turnover can be the ultimate blow."

The coronavirus will likely claim more business victims as the epidemic continues. On Thursday central planning office CPB said the Covid-19 crisis will definitely cause a recession in the Netherlands.