Editor’s note: The following is part of Startland News’ ongoing coverage of the impact of Coronavirus (COVID-19) on Kansas City’s entrepreneur community, as well as how innovation is helping to drive a new normal in the ecosystem. Click here to follow related stories as they develop.
Sometimes a check is answer enough.
While federal officials never officially clarified whether venture capital-backed startups can receive relief aid from the Paycheck Protection Program, companies in Kansas City applied and some already have received funds, said Darcy Howe.
“If there is any uncertainty remaining, it will be sorted out on the backend,” said Howe, founder and managing director of the KCRise Fund, which boasts a portfolio family that includes such Kansas City heavy-hitters as Bungii, Daupler, backstitch, BacklotCars, Bardavon, ShotTracker, and PayIt (exited from the fund).
“We can complain that it wasn’t fully baked, but to have Congress unanimously approve PPP, then seven days later have a plan and applications ready, and seven days after that, money comes? Crazy impressive in my book,” she added.
So far, more than $6.4 billion in PPP funds have been approved for Missouri businesses, with $3.7 billion already on the way to Kansas entrepreneurs, according to the U.S. Small Business Administration. Applicants in the “Professional, Scientific and Technical Services” category have received more than $30.3 billion nationwide — coming in behind only “Construction” at $34 billion in aid.
“PPP is going to help a lot of businesses over the next couple of months and VC-backed companies will have oversight to see that dollars will be used wisely and bring value back to taxpayers,” Howe said.
SBA’s early reports do not specify which businesses received funds. The breakdown from the SBA indicated $248 billion of the $349 billion aid package already had been awarded as of Monday, putting the funds on track to run out this week. Congress is expected to consider adding at least another $250 billion to the pot.
Howe — along with the KC Tech Council and a national coalition of small business advocates — argued that the U.S. Treasury and SBA should open funds from the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act to venture-backed companies, which initially appeared to be excluded from the mix.
“These businesses are retooling and finding solutions even in this environment, yet they aren’t immune [to the economic impact of COVID-19],” Howe said.
Federal PPP relief aid is offered only to small businesses with fewer than 500 employees. But under the program’s affiliation rules, the employee count of a company with venture capital-backing would be considered part of the sum total of all its funder’s portfolio companies — potentially pushing the count over 500, depending on the size of the startup or portfolio.
Nothing in the SBA’s affiliation rules outright prohibits venture-backed companies from receiving PPP loans, according to a recent report by Forbes, but the calculus used to determine exclusion “can quickly become unwieldy.”
Howe, along with Ryan Weber of the KC Tech Council, offered kudos for the push from both sides of the political aisle to bring relief to Kansas City companies.
“Who would have ever thought our government could be so nimble?” Howe said. “And like early stage company beta tests, iterating as the market responds is a muscle I’m happy to see our state, local and federal governments flex.”