Politics

A bipartisan House bill would extend COVID-19 aid to more VC-backed startups

Some of the rules for small-business loans have deterred startups from applying, and even prompted some to retract applications.

Anna Eshoo

Rep. Anna Eshoo, a Silicon Valley Democrat, co-introduced a bill that seeks to help more startups get small-business loans under coronavirus relief packages.

Photo: Win McNamee/Getty Images

A pair of lawmakers from both sides of the aisle introduced legislation Monday in the House that would ensure that more venture-capital-backed startups are eligible to receive small-business loans under federal stimulus, following a weekslong lobbying blitz from the VC and startup world.

The bill, co-sponsored by seven other lawmakers, would waive "affiliate" rules for startups that have no majority shareholder, fulfilling the wish of tech trade groups including the National Venture Capital Association. Startups for weeks have complained they are being denied the government's small-business loans, or not applying altogether, because the rules require companies to count investors and their other affiliates under the employee headcount, which is capped at 500.

The rules, meant to ensure that larger firms do not exploit Small Business Administration loan programs like the new Paycheck Protection Program, deem a company an affiliate of another when one controls, or has the power to control, the second. That has left many startups, which are frequently backed by VC firms, unable to receive the loans.

"Startups, like all small businesses in our country, are experiencing a trying time. Unfortunately, many have laid off employees while others have shuttered their businesses completely," said Rep. Anna Eshoo, the Silicon Valley Democrat who co-introduced the bill with Republican Rep. Cathy McMorris Rodgers, who represents a part of Washington state that includes Spokane. "My legislation ensures that startups can access the Paycheck Protection Program to keep employees on payroll or rehire those they've recently laid off."

The Caring for Startup Employees Act of 2020 would bar startups from using money they received under the new waiver to pay their investors.

Since the PPP launched in March, the Department of the Treasury and Small Business Administration have issued a stream of sometimes confusing guidelines for who can seek the money; the loan is forgivable if certain criteria is met. Some of the rules deterred startups from applying for loans — and even prompted a wave of startups to retract applications. A number of startups have asked to change investors' voting and control terms to make them eligible for the grants.

In a report last month, the National Venture Capital Association predicted that startups will continue to do mass layoffs, with up to 80% cutting between 10% and 50% percent of employees over the next few months. The group says roughly 300 U.S. startups have laid off more than 30,000 employees.

"Startups and small businesses are the engines of our economy, but right now, they are being hit hard through no fault of their own," McMorris Rodgers said in a statement. "In order to support American ingenuity, we need to ensure these startups can weather this storm so they can continue to grow, innovate, and enrich our communities."

House Speaker Nancy Pelosi, who has continuously called for a startup-friendly fix to the PPP, is expected to unveil the Democrats' proposal for the next COVID-19 economic stimulus package later this week. Pelosi's office did not immediately respond to an inquiry about whether the package will include a fix to the PPP for startups.

Fintech

Can crypto regulate itself? The Lummis-Gillibrand bill hopes so.

Creating the equivalent of the stock markets’ FINRA for crypto is the ideal, but experts doubt that it will be easy.

The idea of creating a government-sanctioned private regulatory association has been drawing more attention in the debate over how to rein in a fast-growing industry whose technological quirks have baffled policymakers.

Illustration: Christopher T. Fong/Protocol

Regulating crypto is complicated. That’s why Sens. Cynthia Lummis and Kirsten Gillibrand want to explore the creation of a private sector group to help federal regulators do their job.

The bipartisan bill introduced by Lummis and Gillibrand would require the CFTC and the SEC to work with the crypto industry to look into setting up a self-regulatory organization to “facilitate innovative, efficient and orderly markets for digital assets.”

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Keep Reading Show less
Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.
Enterprise

Alperovitch: Cybersecurity defenders can’t be on high alert every day

With the continued threat of Russian cyber escalation, cybersecurity and geopolitics expert Dmitri Alperovitch says it’s not ideal for the U.S. to oscillate between moments of high alert and lesser states of cyber readiness.

Dmitri Alperovitch (the co-founder and former CTO of CrowdStrike) speaks at RSA Conference 2022.

Photo: RSA Conference

When it comes to cybersecurity vigilance, Dmitri Alperovitch wants to see more focus on resiliency of IT systems — and less on doing "surges" around particular dates or events.

For instance, whatever Russia is doing at the moment.

Keep Reading Show less
Kyle Alspach

Kyle Alspach ( @KyleAlspach) is a senior reporter at Protocol, focused on cybersecurity. He has covered the tech industry since 2010 for outlets including VentureBeat, CRN and the Boston Globe. He lives in Portland, Oregon, and can be reached at kalspach@protocol.com.

Policy

How the internet got privatized and how the government could fix it

Author Ben Tarnoff discusses municipal broadband, Web3 and why closing the “digital divide” isn’t enough.

The Biden administration’s Internet for All initiative, which kicked off in May, will roll out grant programs to expand and improve broadband infrastructure, teach digital skills and improve internet access for “everyone in America by the end of the decade.”

Decisions about who is eligible for these grants will be made based on the Federal Communications Commission’s broken, outdated and incorrect broadband maps — maps the FCC plans to update only after funding has been allocated. Inaccurate broadband maps are just one of many barriers to getting everyone in the country successfully online. Internet service providers that use government funds to connect rural and low-income areas have historically provided those regions with slow speeds and poor service, forcing community residents to find reliable internet outside of their homes.

Keep Reading Show less
Aditi Mukund
Aditi Mukund is Protocol’s Data Analyst. Prior to joining Protocol, she was an analyst at The Daily Beast and NPR where she wrangled data into actionable insights for editorial, audience, commerce, subscription, and product teams. She holds a B.S in Cognitive Science, Human Computer Interaction from The University of California, San Diego.
Fintech

How I decided to exit my startup’s original business

Bluevine got its start in factoring invoices for small businesses. CEO Eyal Lifshitz explains why it dropped that business in favor of “end-to-end banking.”

"[I]t was a realization that we can't be successful at both at the same time: You've got to choose."

Photo: Bluevine

Click banner image for more How I decided series

Bluevine got its start in fintech by offering a modern version of invoice factoring, the centuries-old practice where businesses sell off their accounts receivable for up-front cash. It’s raised $240 million in venture capital and about $700 million in total financing since its founding in 2013 by serving small businesses. But along the way, it realized it was better to focus on the checking accounts and lines of credit it provided customers than its original product. It now manages some $500 million in checking-account deposits.

Keep Reading Show less
Ryan Deffenbaugh
Ryan Deffenbaugh is a reporter at Protocol focused on fintech. Before joining Protocol, he reported on New York's technology industry for Crain's New York Business. He is based in New York and can be reached at rdeffenbaugh@protocol.com.
Latest Stories
Bulletins