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Power

VC-backed startups fighting exclusion from coronavirus stimulus package

The Senate-backed bill left many startups likely ineligible for $350 billion in emergency loans.

House speaker Nancy Pelosi

Speaker Nancy Pelosi and the House may vote on the coronavirus relief package as soon as Friday.

Photo: Alex Edelman/AFP via Getty Images

Lobbyists for the venture capital industry are pushing the Small Business Administration to correct what they called a potentially devastating flaw that could exclude many startups from the $2.2 trillion federal stimulus package President Trump is expected to sign.

When the Senate late Wednesday adopted the SBA's definition of what constitutes a small business, they left tens of thousands of venture-capital-backed startups likely ineligible for $350 billion in emergency loans included in the coronavirus relief bill. But there is still hope, said lobbyists seeking to convince the government agency tasked with overseeing the massive lending package to tweak the criteria.

The historic 880-page bill passed by the Senate, which could see a House vote as soon as Friday, makes companies with fewer than 500 employees eligible for emergency loans. Firms that use the loans to retain or rehire workers could see their debt forgiven.

The problem for smaller tech companies and startups that rely on venture funding — many of which have already cut their workforces, with some sectors hammered by city and state shelter-in-place orders — is that the SBA's rules include an "affiliate" clause that counts the employees of all companies backed by a venture firm against the 500.

"It's our view that it is within the current authority of the SBA to amend the regulation on its own," said John Dearie, president of the Center for American Entrepreneurship, who unsuccessfully lobbied senators drafting the relief bill to waive the regulations. "There are a lot of us who are talking and emailing the SBA and making it known that this is a major problem that needs to be fixed, and we are guardedly optimistic that they will fix this in the coming days."

Should that fail, Dearie said, he and other small business, tech and venture capital lobbyists will try to convince senators to make the fix in what's known as a technical corrections bill, which often follows the passage of major legislation rushed out in a crisis.

In the meantime, venture-backed tech startups who want to apply for loans will need to determine whether they trigger the SBA's affiliate rules, which seek to ensure that larger businesses do not exploit the agency's programs. The rules deem a company an affiliate of another when one controls, or has the power to control, the second.

In an industry where multiple firms may hold minority stakes, that's not always cut and dry. When in doubt, the SBA rules say the agency is to presume the two entities are affiliated, unless rebuttal evidence is presented showing otherwise.

"It's highly fact-specific," said Rebecca Wilsker, a lawyer with Choate Hall & Stewart LLP of Boston. "It involves looking at the capitalization table of a company, looking at the governing documents of a company and determining for each specific company who's in charge and how does it fit together."

Since 2015, 34,471 companies have raised VC funding, according to the National Venture Capital Association. The rule excluding venture-backed startups from eligibility was one of many provisions added into the bill when senators decided to use the SBA to administer the loans. While the SBA provision has faced criticism in the past, the agency's shift from administering $25 billion in loans to a proposed $375 billion has upped the stakes.

Lobbyists for the venture capital industry got their first glimpse of the coronavirus spending bill on March 19. They panicked, but for an entirely different reason. Another provision in the draft, also adopted from the SBA's guidelines, would have required the founder or CEO of a company to personally guarantee any government-backed loans.

"That would have left just about every small business we represent out of the program," said Justin Field, head of government affairs for the National Venture Capital Association. "You're not going to put your house and family at risk to make payroll for two months."

Field, along with a handful of other lobbyists representing tech companies and small-business interests, scrambled to make their case to the bill's drafters. It wasn't easy. With $2 trillion on the table, and just a few days to draw up the mammoth bill, the requests for senators and their staffers were coming fast and furious.


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"Everyone and their mother is yelling at them about something. There's no time to sit down for half an hour and quietly explain the issue. Your entire bandwidth to make the case is three lines in an email that you hope someone reads," Field said.

Late Sunday night, Field said his group finally got a response from a Senate contact working on the bill. Language waiving the personal guarantee provision had been included. It was only after that fire had been extinguished, Field said, that he and others realized that the SBA's affiliate clause would also exclude many venture-capital backed startups and tech companies from one of the bill's most powerful relief programs.

Field and his fellow lobbyists rallied again on Monday, but felt like they had already cashed in their chips. "Time had run out to make more changes," Field said.

People

Google’s trying to build a more inclusive, less chaotic future of work

Javier Soltero, the VP of Workspace at Google, said time management is everything.

With everyone working in new places, Google believes time management is everything.

Image: Google

Javier Soltero was still pretty new to the G Suite team when the pandemic hit. Pretty quickly, everything about Google's hugely popular suite of work tools seemed to change. (It's not even called G Suite anymore, but rather Workspace.) And Soltero had to both guide his team through a new way of working and help them build the tools to guide billions of Workspace users.

This week, Soltero and his team announced a number of new Workspace features designed to help people manage their time, collaborate and get stuff done more effectively. It offered new tools for frontline workers to communicate better, more hardware for hybrid meetings, lots of Assistant and Calendar features to make planning easier and a picture-in-picture mode so people could be on Meet calls without really having to pay attention.

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Sponsored Content

The future of computing at the edge: an interview with Intel’s Tom Lantzsch

An interview with Tom Lantzsch, SVP and GM, Internet of Things Group at Intel

An interview with Tom Lantzsch

Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corporation

Edge computing had been on the rise in the last 18 months – and accelerated amid the need for new applications to solve challenges created by the Covid-19 pandemic. Tom Lantzsch, Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corp., thinks there are more innovations to come – and wants technology leaders to think equally about data and the algorithms as critical differentiators.

In his role at Intel, Lantzsch leads the worldwide group of solutions architects across IoT market segments, including retail, banking, hospitality, education, industrial, transportation, smart cities and healthcare. And he's seen first-hand how artificial intelligence run at the edge can have a big impact on customers' success.

Protocol sat down with Lantzsch to talk about the challenges faced by companies seeking to move from the cloud to the edge; some of the surprising ways that Intel has found to help customers and the next big breakthrough in this space.

What are the biggest trends you are seeing with edge computing and IoT?

A few years ago, there was a notion that the edge was going to be a simplistic model, where we were going to have everything connected up into the cloud and all the compute was going to happen in the cloud. At Intel, we had a bit of a contrarian view. We thought much of the interesting compute was going to happen closer to where data was created. And we believed, at that time, that camera technology was going to be the driving force – that just the sheer amount of content that was created would be overwhelming to ship to the cloud – so we'd have to do compute at the edge. A few years later – that hypothesis is in action and we're seeing edge compute happen in a big way.

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Saul Hudson
Saul Hudson has a deep knowledge of creating brand voice identity, especially in understanding and targeting messages in cutting-edge technologies. He enjoys commissioning, editing, writing, and business development, in helping companies to build passionate audiences and accelerate their growth. Hudson has reported from more than 30 countries, from war zones to boardrooms to presidential palaces. He has led multinational, multi-lingual teams and managed operations for hundreds of journalists. Hudson is a Managing Partner at Angle42, a strategic communications consultancy.
People

Citizen’s plan to keep people safe (and beat COVID-19) with an app

Citizen CEO Andrew Frame talks privacy, safety, coronavirus and the future of the neighborhood watch.

Citizen added COVID-19 tracking to its app over the summer — but its bigger plans got derailed.

Photo: Citizen

Citizen is an app built on the idea that transparency is a good thing. It's the place users — more than 7 million of them, in 28 cities with many more to come soon — can find out when there's a crime, a protest or an incident of any kind nearby. (Just yesterday, it alerted me, along with 17,900 residents of Washington, D.C., that it was about to get very windy. It did indeed get windy.) Users can stream or upload video of what's going on, locals can chat about the latest incidents and everyone's a little safer at the end of the day knowing what's happening in their city.

At least, that's how CEO Andrew Frame sees it. Critics of Citizen say the app is creating hordes of voyeurs, incentivizing people to run into dangerous situations just to grab a video, and encouraging racial profiling and other problematic behaviors all under the guise of whatever "safety" means. They say the app promotes paranoia, alerting users to things that they don't actually need to know about. (That the app was originally called "Vigilante" doesn't help its case.)

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Why the CEO of GoFundMe is calling out Congress on coronavirus

GoFundMe has seen millions of Americans asking for help to put food on the table and pay the bills. Tim Cadogan thinks Congress should help fix that.

"They need help with rent. They need help to get food. They need help with basic bills," GoFundMe CEO Tim Cadogan said. "That's what people need help with to get through this period."

Photo: John Lamparski/Getty Images

Tim Cadogan started his first day as CEO of GoFundMe about two weeks before the pandemic wrecked the world. He knew he was joining a company that tried to help people make extra money. He didn't know his company would become a lifeline for millions of Americans who couldn't pay their bills or put food on the table.

And so after a year in which millions of people have asked for help from strangers on GoFundMe, and at least $600 million has been raised (that number could be as much as $1 billion or more now, but GoFundMe didn't provide fundraising data past August) just for coronavirus-related financial crises, Cadogan has had enough. On Thursday, he wrote an open letter to Congress calling for a massive federal aid package aimed at addressing people's fundamental needs. In an unusual call for federal action from a tech CEO, Cadogan wrote that GoFundMe should not and can never replace generous Congressional aid for people who are truly struggling.

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Anna Kramer

Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

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