The US government aid package for the virus-hit economy inadvertently does Big Tech a favor.
Many Silicon Valley startups will miss out on $350 billion loans offered by the Small Business Administration.
In some cases, entities with the same venture capital investor are lumped together, pushing them above the 500-employee threshold to receive assistance. It pressures them to sell to the biggest players like Google parent Alphabet or fold.
The $2.2 trillion emergency relief will help many workers and businesses dealing with an unprecedented economic shutdown. The US House of Representatives passed the bill on Friday after the Senate approved it last week. One provision that kicks in at the end of this week boosts credit for a program at the Small Business Administration, which will guarantee repayment of the $350 billion in additional loans until the end of this year.
But technical rules mean many startups will be excluded. Firms with the same VC backer, or group of backers that have control through ownership stakes, management decision-making or other means are considered to be affiliated entities and their staff are counted together. If the combined portfolio companies have more than 500 employees, they are ineligible for the loan though the individual startup may have, say, only 50 workers.
Yet like many small businesses, layoffs have ratcheted up at startups. Business travel startup Lola recently let go of 34 employees, online news organization Protocol reported. Many other their portfolio companies are reviewing or have implemented staffing changes, including hospitality firm Sonder and business traveler housing outfit Zeus Living.