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."

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

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Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

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FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

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Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

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Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

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Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

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