Prominent tech companies that have raised millions in venture capital funding were among the recipients of some of the largest loans distributed by the federal government to small businesses during the coronavirus pandemic.
The car rental service Getaround, the dog product business BarkBox, the insurance business MetroMile and cybersecurity company IronNet are among the companies that confirmed to The Technology 202 they received loans under the Paycheck Protection Program. These companies all received loans between $5 million and $10 million, according to data released yesterday by the Small Business Administration about the $660 billion relief program.
The recruiting start-up Hired and supply chain payments company TradeShift also took loans between $5 million and $10 million, according to SBA records. These companies declined to comment.
Several companies defended taking PPP loans as a necessary lifeline as the pandemic dramatically disrupted their businesses.
“On a global basis, our business was drastically impacted by the lockdowns and restrictions stemming from the coronavirus pandemic,” Getaround spokeswoman Courtney Richard said in a statement. “The PPP program helped reduce the otherwise severe impact on the health of our organization. In turn, this enabled us to continue providing an essential service to the communities we serve.”
However there were signs some of these companies were struggling prior to the pandemic. Getaround for instance announced significant layoffs in early January, as the company sought to cut costs.
The new records have reignited a debate in Silicon Valley about whether venture-backed companies should have applied for the relief.
The tech sector has not been as dramatically impacted by the pandemic as some other small businesses seeking the loans, including restaurants, hair and nail salons and small retailers. Some critics have previously said these businesses should have taken priority over tech companies that have existing investors with deep reserves of funding on hand.
As my colleagues wrote yesterday, the new data “paints a picture of a haphazard first-come, first-served program that was not designed to evaluate the relative need of the recipients.”
There was also widespread confusion when the program launched over whether start-ups that raised venture funding were even eligible for the government-backed loans. That sparked an intense industry lobbying effort to force the government to clarify the rules, a move backed by several prominent congressional Democrats. Venture capitalists argued the industry needed the loans to help build technologies that could aid with pandemic response. The new filings show many tech companies ultimately moved forward with applying for the program.
Now, the companies that took these loans say it helped them avoid layoffs, at least until the end of the year.
“The funding offered through the Program played a significant role in helping us avoid headcount reductions and positioned us to maintain our full staffing levels for the rest of 2020,” said BarkBox chief of staff Christina Donnelly in a statement.
Other major tech players, however, disputed the SBA records.
The list included several major venture capital firms, including Foundation Capital and Index Ventures. But both firms told The Technology 202 that they had never applied for such a loan, and the addresses included in the SBA’s filings were inaccurate. They said they were working with the agency to correct the record.
“The entry listed is in error, as although it lists us as a business name, it is not our address or correct information about our fund,” Index spokeswoman Ana Andreescu said in an email. “Our legal team is looking into why our name is listed and look to correct it ASAP.”
Bird, a purveyor of on-demand scooters, was also listed as a loan recipient. But the company says it never formally applied for such a loan, even though it did at one point discuss the possibility of taking one with its banker Citi, Bird chief executive Travis VanderZanden said on Twitter:
Citi also disputed the records. ““Citi has not funded a PPP loan for Bird,” spokeswoman Danielle Romero-Apsilos said in a statement. “Citi will seek the assistance of the SBA to ensure that the agency’s data accurately reflects actual PPP lending.”
The SBA did not immediately respond to a request for comment about the venture firms’ denial they should be included in the records. A senior administration official did say some firms might mistakenly appear in its database if the loans were later returned.
Other companies that appeared on the list said they already returned the money.
ZocDoc, an online medical appointment booking service, said it paid it back more than a month ago.
“As a business that saw our revenue based on in-person doctor appointment bookings dramatically decline at the onset of COVID-19, we met the criteria and applied for the SBA loan,” ZocDoc spokeswoman Jessica Aptman said in a statement. “Subsequently, as our business began to recover — due to our quick expansion into telehealth and the return of in-person bookings — we were able to obtain additional capital. As a result, we fully returned all PPP funds over a month ago so they could be redistributed to other small businesses in need.”