yesEmily BirnbaumNone
×

Get access to Protocol

Will be used in accordance with our Privacy Policy

I’m already a subscriber
Politics

'Kick in the teeth': Startups pivoting again after warning on SBA loans

If businesses already applied for a loan through the PPP but believe they don't fit the bill anymore, they have until May 7 to return the money.

Steven Mnuchin

Steven Mnuchin's Treasury Department released stricter guidance for businesses seeking emergency loans.

Photo: Yuri Gripas/Abaca Press/Bloomberg via Getty Images

Venture capital-backed startups are once again recalibrating their stances in applying for coronavirus stimulus loans after the Treasury Department sent out new guidance.

The guidance, released late Thursday, places stark parameters around how startups should assess whether they need loans from the Small Business Administration, putting the onus on individual companies and their lawyers to take a hard look at whether they could obtain money from investors rather than the government.

"It's important that startups show evidence that they did a thorough, good-faith evaluation of their access to other sources of liquidity before they apply," said Trevor Loy, an investor at FlyWheel VC. "Even if the answer is no, you need to show evidence that you asked the question and got the answer."

The Treasury Department also clarified that businesses must prove they need the money because of struggles related to COVID-19. And there's a warning: If you already applied for a loan through the PPP but feel like you don't fit the bill anymore, you have until May 7 to return the money.

Ed Zimmerman, a lawyer who specializes in venture capital and startups at Lowenstein Sandler LLP, called the new guidance a "kick in the teeth."

"We've previously begged @USTreasury @SBAgov for more guidance on what the certification of need means & Treasury has now given us RETROACTIVE GUIDANCE," Zimmerman tweeted. "The Goal Posts Have MOVED after the game was played!"

Cooley, a law firm that has been advising VC-backed firms on government aid, responded to the guidance with urgent advice: "To the extent that applicants did not specifically consider alternate sources of liquidity in connection with their initial application, it is clear from the FAQs that they should."

The new guidance could result in a slew of VC-backed startups retracting applications or even returning the money. One industry source told Protocol that it's not entirely clear what the guidance means in practice, but noted that many venture capital firms don't have money set aside to help out existing companies.

"A lot of times, when a venture fund raises money, it's not all for existing companies — it's for money in the future," the source said. "You can look at this and ask, 'Wow, your venture firm has a lot of money, why can't you get that?' But … that money may only be for growth milestones, that money may only be available for new companies. … All those factors can mean that the funds may not be available to the company to sustain ongoing operations."

The PPP ran out of money last week, but it is expected to begin accepting applications again on Monday after receiving a $310 billion infusion from Congress. President Trump signed a relief package freeing up $484 billion in additional funding, part of trillions in spending designed to rescue the battered economy.

"Consequences of new guidance seem clear," tweeted Mark Suster, the managing partner at Upfront Ventures. "If you believe you have other sources of capital not detrimental to your business, you should not accept PPP loan. … I believe founders should consider re-discussing with board calls to discuss whether the board still agrees [to] accepting PPP."

Policy

Arizona bill would reform Google and Apple app stores

HB2005 would allow app developers to use third-party payment systems.

HB2005 could make it through the Arizona House of Representatives as soon as this week.

Photo: James Yarema/Unsplash

Arizona State Rep. Regina Cobb hadn't even formally introduced her app store legislation last month when Apple and Google started storming into the state to lobby against it.

Apple tapped its own lobbyist, Rod Diridon, to begin lobbying in Arizona. It hired Kirk Adams, the former chief of staff to Arizona Gov. Doug Ducey and speaker of the Arizona House of Representatives, to negotiate with Cobb on its behalf. It quickly joined the Arizona Chamber of Commerce, which began lobbying against the bill. And lawyers for both Google and Apple went straight to the Arizona House's lawyers to argue that the bill is unconstitutional.

Keep Reading Show less
Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

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.

Keep Reading Show less
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.)

Keep Reading Show less
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.

Keep Reading Show less
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.

Keep Reading Show less
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.

Latest Stories