The Dunedin City Council's economic development unit (EDU) and the city's Upstart Business Incubator are considering a series of steps, including a $50,000 marketing support fund, to try to minimise the impact of the credit crunch on some of Dunedin's brightest young companies.
The next few months are expected to be "crucial" for some of the 16 companies associated with the Upstart incubator programme in Dunedin, as well as other vulnerable start-up companies, Upstart chief executive Norman Evans said.
The fledgling companies associated with Upstart - many of them in the technology field - already employed about 85 staff across the city, and together boasted annual turnover of up to $7 million.
But some could face ruin in the next few months, as investment dries up and buyers stop spending because of the global economic meltdown.
Their predicament was one faced by other companies across the city, New Zealand and globally, but losing Upstart-associated companies would be a blow to the city's employment and wealth prospects, he said.
Companies within the incubator programme were built on new, bright ideas and had the potential to grow into much larger entities, employing many more staff and increasing turnover to $100 million or more annually, Mr Evans said.
However, the economic downturn meant investors were increasingly "putting their hands in pockets and keeping them there", while sales cycles were also lengthening, placing even more importance on the need for investment, he said.
"There will be losses, there's no doubt about that.
''There will be people go under because they can't fund their business, or their markets disappear," Mr Evans said.
EDU manager Peter Harris agreed, saying fledgling companies were particularly vulnerable during their start-up years, with sometimes irregular income streams and often high costs.
"There will be a number of businesses in the start-up phase, not only in Upstart . . . that are going to struggle to get the cash flow to keep going.
''And it's not because they haven't got a good idea.
"Some of them may not survive."
Those fighting for investment were also facing increasingly tough terms attached, forcing businesses to give up more equity; and pressures on company boards were mounting, he said.
The EDU responded with one new initiative, offering a $50,000 marketing support fund to help businesses boost sales.
Mr Harris said consideration was also being given to what structural changes could be made to encourage private investment, although it would be up to the council to decide, separately, whether it wanted to become an investor.
"Any idea is a good idea at this stage, but investors are wary.
''If you are looking at it from their point of view, so they should be.
"There's no silver bullet.
''This is a problem coming at us from a number of angles."
Mr Harris said he had received mixed views of where the economy was headed - some dire, others more optimistic - but had "given up trying to forecast it".
Instead, to use a Civil Defence analogy, it was "time to be filling the sandbags, rather than sitting around debating how long it's going to be flooding", he said.
Mr Evans remained positive about the future, saying the crucial period facing Dunedin over the next few months was also a time of opportunity.
Upstart was established in 2004 and was on a "good trend" upwards so far, helped by funding from the Dunedin City Council - $150,000 annually - as well as the University of Otago, Otago Polytechnic and New Zealand Trade and Enterprise, its largest donor.
There was talk of creating a new Dunedin investment fund, although the idea was in its early stages; and the New Zealand Venture Investment Fund, an organisation of investors, had launched a $5 million Halo Fund.
Other, non-monetary initiatives were also under way in Dunedin, but he believed the city council had a leadership role in supporting those firms in which it believed.
