Thread by @msuster, 1/ Important PPP Update. The government has just clarified its position with [...]

1/ Important PPP Update. The government has just clarified its position with respect to the PPP program today in ways that affect VC-backed startups. I will give you my view on important change, but it is here if you& #39;d like to read: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf">https://home.treasury.gov/system/fi...

2/ Previously I believed the goal of the PPP was to "Protect Paychecks" (read: jobs) at small businesses and I believed the government& #39;s goal was to avoid unnecessary increases to unemployment. Today& #39;s guidance changes my views in one important way ...

3/ The previous decision tree for startup management I believe was:
- Financial duress related to Covid-19?
- Protecting jobs if you take PPP?
- Don& #39;t violate the Affiliate Rule?
- Can you obtain board approval?

4/ With today& #39;s guidelines, in addition to previous decision tree for whether you qualify for a PPP loan you also must consider:
- Do you have access to other sources of capital (other than the PPP) that are not significantly detrimental to your business?

5/ On the surface I believe this may make "protecting paychecks" at tech startups more difficult because without a PPP loan I believe some management teams are likely to be more aggressive in cutting costs, which means cutting jobs.

6/ If you applied for PPP and with new guidance no longer believe you qualify you MUST return the money by May 7th to have a "no fault" status on your previous certification with your bank

7/ Consequences of new guidance seem clear. 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 accepting PPP

8/ Note that I am NOT saying as a VC-backed company you can& #39;t qualify. It is possible that you raised money but do not believe existing investors can or will support you going forward and determine that you don& #39;t have other viable sources of capital, or ...

9/ It may be that you determine that your immediate cash need to protect jobs is so acute relative to your ability to raise capital in a way that is non-detrimental to your business. These are decisions CEOs must process

10/ Obviously startups should consult their lawyers before making these difficult decisions regarding the PPP loans

11/ Of course a program designed during an economic crisis is bound to change and be clarified and there may be further changes in the weeks / months ahead but for now I think the guidance makes VC-backed tech startups status pretty clear

12/ Law firm Cooley did a very good job of summarizing today& #39;s guidance here [end]
https://www.cooley.com/news/insight/2020/2020-04-23-ppp-loan-program-new-faqs-released-necessity-guidance">https://www.cooley.com/news/insi...

Latest Threads Unrolled: