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| Start-Ups Pursue ‘Free Money’ With Relief Funds, Prompting Backlash | Start-Ups Pursue ‘Free Money’ With Relief Funds, Prompting Backlash |
| (6 days later) | |
| Domio, a start-up that offers short-term rentals, has its headquarters in a New York City loft that features beer on tap, a game room and a wall of house slippers for visitors. The fast-growing and unprofitable company has raised $117 million in venture capital, including $100 million in August. | Domio, a start-up that offers short-term rentals, has its headquarters in a New York City loft that features beer on tap, a game room and a wall of house slippers for visitors. The fast-growing and unprofitable company has raised $117 million in venture capital, including $100 million in August. |
| When the coronavirus pandemic caused Domio’s bookings to dry up last month, it laid off staff but did not ask its investors for more funding. | When the coronavirus pandemic caused Domio’s bookings to dry up last month, it laid off staff but did not ask its investors for more funding. |
| Instead, Domio applied for a federal loan under the Paycheck Protection Program, the $349 billion plan to save jobs at small businesses during the outbreak. It received a loan on April 13. Jay Roberts, Domio’s chief executive, said it now most likely had enough cash to last until 2021. Three days later, the program’s funding ran out, even as hundreds of hard-hit restaurants, hair salons and shops around the country missed out on the relief. | Instead, Domio applied for a federal loan under the Paycheck Protection Program, the $349 billion plan to save jobs at small businesses during the outbreak. It received a loan on April 13. Jay Roberts, Domio’s chief executive, said it now most likely had enough cash to last until 2021. Three days later, the program’s funding ran out, even as hundreds of hard-hit restaurants, hair salons and shops around the country missed out on the relief. |
| Questions about whether the funds were disbursed fairly and whether some applicants deserved them have drawn scrutiny to the aid program. Several companies that got millions of dollars in loans, such as the Shake Shack and Kura Sushi restaurant chains, faced criticism and eventually gave the money back. On Friday, President Trump signed legislation approving a fresh $320 billion to replenish the program, which the Small Business Administration is directing. | Questions about whether the funds were disbursed fairly and whether some applicants deserved them have drawn scrutiny to the aid program. Several companies that got millions of dollars in loans, such as the Shake Shack and Kura Sushi restaurant chains, faced criticism and eventually gave the money back. On Friday, President Trump signed legislation approving a fresh $320 billion to replenish the program, which the Small Business Administration is directing. |
| Now, scrutiny of the program has reached technology start-ups like Domio. While many of these young companies have been hurt by the pandemic, they are not ailing in the same way that traditional small businesses are. Many mom-and-pop enterprises, which tend to employ hourly workers and operate on razor-thin margins, are shutting down immediately because of economic pain or begging for donations via GoFundMe campaigns. | Now, scrutiny of the program has reached technology start-ups like Domio. While many of these young companies have been hurt by the pandemic, they are not ailing in the same way that traditional small businesses are. Many mom-and-pop enterprises, which tend to employ hourly workers and operate on razor-thin margins, are shutting down immediately because of economic pain or begging for donations via GoFundMe campaigns. |
| But start-ups, which last year raised more than $130 billion in funding, have sometimes turned to the government loans not for day-to-day survival but simply to buy useful time. In Silicon Valley parlance, they want to extend their “runway,” or cash on hand, to a year or more. Many are backed by venture capital investors, who have accumulated record sums of capital — $121 billion as of the start of this year — that could be used to keep companies afloat. | But start-ups, which last year raised more than $130 billion in funding, have sometimes turned to the government loans not for day-to-day survival but simply to buy useful time. In Silicon Valley parlance, they want to extend their “runway,” or cash on hand, to a year or more. Many are backed by venture capital investors, who have accumulated record sums of capital — $121 billion as of the start of this year — that could be used to keep companies afloat. |
| The start-up rush to tap the finite pool of government aid has stirred up a furious debate in Silicon Valley over whether these companies should have applied. | The start-up rush to tap the finite pool of government aid has stirred up a furious debate in Silicon Valley over whether these companies should have applied. |
| “They are doing it because they can,” said Chris Olsen, a venture capitalist with Drive Capital Partners in Columbus, Ohio. “They view it as free money.” | “They are doing it because they can,” said Chris Olsen, a venture capitalist with Drive Capital Partners in Columbus, Ohio. “They view it as free money.” |
| Silicon Valley Bank, which serves start-ups and is one of the lenders offering the Small Business Administration loans, said that it had received 5,500 applications and that nearly two-thirds — more than than 3,600 — had been approved. | Silicon Valley Bank, which serves start-ups and is one of the lenders offering the Small Business Administration loans, said that it had received 5,500 applications and that nearly two-thirds — more than than 3,600 — had been approved. |
| Most tech start-ups have fewer than 500 employees, making them eligible for the federal loans. They needed simply to certify that current “economic uncertainty” made the funds necessary to support their “ongoing operations.” The loans can be forgiven if used to cover payroll. The government has not shared a list of recipients. | Most tech start-ups have fewer than 500 employees, making them eligible for the federal loans. They needed simply to certify that current “economic uncertainty” made the funds necessary to support their “ongoing operations.” The loans can be forgiven if used to cover payroll. The government has not shared a list of recipients. |
| Justin Field, the senior vice president of government affairs at the National Venture Capital Association, a lobbying group, said start-ups were justified in seeking the federal aid. | Justin Field, the senior vice president of government affairs at the National Venture Capital Association, a lobbying group, said start-ups were justified in seeking the federal aid. |
| “These are potentially some of the most important companies for America’s future competitiveness,” he said. | “These are potentially some of the most important companies for America’s future competitiveness,” he said. |
| Some start-ups said they saw how they had an advantage over traditional small businesses in obtaining the loans. While the application process has been difficult to navigate, many of the start-ups leaned on their relationships with banks, investors, law firms and the lobbying group. | Some start-ups said they saw how they had an advantage over traditional small businesses in obtaining the loans. While the application process has been difficult to navigate, many of the start-ups leaned on their relationships with banks, investors, law firms and the lobbying group. |
| AltMarket, a Los Angeles start-up that released a cryptocurrency honoring the late Wu Tang Clan rapper O.D.B., received a federal loan on April 14, its chief executive, Bryce Weiner, said. He said his company, which has worked with financial regulators in the past, was better equipped to sort through the loan application than, say, a restaurant owner. He added that he had worked closely with his lawyer for a week, contacting banks and loan providers. | AltMarket, a Los Angeles start-up that released a cryptocurrency honoring the late Wu Tang Clan rapper O.D.B., received a federal loan on April 14, its chief executive, Bryce Weiner, said. He said his company, which has worked with financial regulators in the past, was better equipped to sort through the loan application than, say, a restaurant owner. He added that he had worked closely with his lawyer for a week, contacting banks and loan providers. |
| “It’s clear that people who need this money probably don’t have access to what’s going on,” Mr. Weiner said. | “It’s clear that people who need this money probably don’t have access to what’s going on,” Mr. Weiner said. |
| Jamie Baxter, chief executive of the staffing start-up Qwick, said his chief financial officer had worked overtime for two weeks figuring out the loan application process. Qwick, backed by $7 million in venture funding, received a loan for $500,000. It also cut staff by 70 percent and tapped its investors for an additional $1 million, Mr. Baxter said. | Jamie Baxter, chief executive of the staffing start-up Qwick, said his chief financial officer had worked overtime for two weeks figuring out the loan application process. Qwick, backed by $7 million in venture funding, received a loan for $500,000. It also cut staff by 70 percent and tapped its investors for an additional $1 million, Mr. Baxter said. |
| While it wasn’t initially clear that venture-backed start-ups were eligible for the federal loans, lobbyists spent weeks pushing to clarify that they could participate. The idea gained support in Congress, including from two powerful Californians, Speaker Nancy Pelosi and Representative Kevin McCarthy, who leads House Republicans. | While it wasn’t initially clear that venture-backed start-ups were eligible for the federal loans, lobbyists spent weeks pushing to clarify that they could participate. The idea gained support in Congress, including from two powerful Californians, Speaker Nancy Pelosi and Representative Kevin McCarthy, who leads House Republicans. |
| The National Venture Capital Association also guided investors on participation. Firms like Menlo Ventures distributed messages from the group, asking founders to persuade Senator Marco Rubio, the Florida Republican who leads the small business subcommittee, to support rule changes. | The National Venture Capital Association also guided investors on participation. Firms like Menlo Ventures distributed messages from the group, asking founders to persuade Senator Marco Rubio, the Florida Republican who leads the small business subcommittee, to support rule changes. |
| Mr. Field, the association lobbyist, said it was up to individual companies to decide whether they could truthfully tell the government that they required help. | Mr. Field, the association lobbyist, said it was up to individual companies to decide whether they could truthfully tell the government that they required help. |
| “You have to certify need, there’s no doubt about that,” he said. “How do you define need is a subjective question that you have to figure out.” | “You have to certify need, there’s no doubt about that,” he said. “How do you define need is a subjective question that you have to figure out.” |
| Updated July 7, 2020 | |
| The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization. | |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. | Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| In recent weeks, prominent investors including Albert Wenger at Union Square Ventures, Mark Suster of Upfront Ventures, Seth Levine of Foundry Group and Mr. Olsen of Drive Capital, have published blog posts or letters urging most start-ups not to pursue the money. | In recent weeks, prominent investors including Albert Wenger at Union Square Ventures, Mark Suster of Upfront Ventures, Seth Levine of Foundry Group and Mr. Olsen of Drive Capital, have published blog posts or letters urging most start-ups not to pursue the money. |
| “We just think those companies ought to not get in line in front of Main Street businesses,” Mr. Wenger said. | “We just think those companies ought to not get in line in front of Main Street businesses,” Mr. Wenger said. |
| Manny Medina, founder of Outreach, a sales software start-up that has raised $238 million and is valued at $1.1 billion, said his board of directors and bank had initially pushed him to apply for a loan. His contacts at Silicon Valley Bank told him that the program would be a “free-for-all” and a “run to the money,” he said. Outreach did not apply, he said, but “there was some real pressure.” | Manny Medina, founder of Outreach, a sales software start-up that has raised $238 million and is valued at $1.1 billion, said his board of directors and bank had initially pushed him to apply for a loan. His contacts at Silicon Valley Bank told him that the program would be a “free-for-all” and a “run to the money,” he said. Outreach did not apply, he said, but “there was some real pressure.” |
| Julia Thompson, a spokeswoman for Silicon Valley Bank, said that what Mr. Medina had described did not represent the lender’s “official stance, but may have been one person’s characterization.” | Julia Thompson, a spokeswoman for Silicon Valley Bank, said that what Mr. Medina had described did not represent the lender’s “official stance, but may have been one person’s characterization.” |
| Some start-ups that applied for the loans argued that their jobs should not be treated as more disposable than, say, waiters or house cleaners, despite much higher salaries. Several said they had a fiduciary duty to keep their company alive. | Some start-ups that applied for the loans argued that their jobs should not be treated as more disposable than, say, waiters or house cleaners, despite much higher salaries. Several said they had a fiduciary duty to keep their company alive. |
| Kendrick Nguyen, chief executive of Republic, a site for investing in start-ups that has raised more than $16 million in funding, said he had applied so his company could be in a strong position when the economy bounced back. Republic has enough money to keep going for one to two years despite a steep drop in business last month, he said. | Kendrick Nguyen, chief executive of Republic, a site for investing in start-ups that has raised more than $16 million in funding, said he had applied so his company could be in a strong position when the economy bounced back. Republic has enough money to keep going for one to two years despite a steep drop in business last month, he said. |
| Mr. Nguyen said that Republic had not asked its investors for more money “because, quite frankly, we are in a very sound financial situation for a tech start-up.” He declined to be specific about the financials. | Mr. Nguyen said that Republic had not asked its investors for more money “because, quite frankly, we are in a very sound financial situation for a tech start-up.” He declined to be specific about the financials. |
| Other entrepreneurs said they had no better option than to seek the aid. | Other entrepreneurs said they had no better option than to seek the aid. |
| JetClosing, a real estate tech start-up in Seattle, said its fund-raising plans had been derailed by the virus in March, leading to layoffs of 20 of its 100 employees. Dan Greenshields, the chief executive, said he had applied for a government loan to stave off further cuts. Last Wednesday, JetClosing received a $1.6 million loan. | JetClosing, a real estate tech start-up in Seattle, said its fund-raising plans had been derailed by the virus in March, leading to layoffs of 20 of its 100 employees. Dan Greenshields, the chief executive, said he had applied for a government loan to stave off further cuts. Last Wednesday, JetClosing received a $1.6 million loan. |
| The League, a members-only dating app based in San Francisco, also applied for a federal loan. Amanda Bradford, the chief executive, said that revenue had fallen 10 to 15 percent this year and that the company’s landlord had declined to lower the monthly $13,000 rent. While the League looked into traditional loans, they carried a 16 percent interest rate. A government loan, with an interest rate of 1 percent, would help the company get to one year of cash, she said. | The League, a members-only dating app based in San Francisco, also applied for a federal loan. Amanda Bradford, the chief executive, said that revenue had fallen 10 to 15 percent this year and that the company’s landlord had declined to lower the monthly $13,000 rent. While the League looked into traditional loans, they carried a 16 percent interest rate. A government loan, with an interest rate of 1 percent, would help the company get to one year of cash, she said. |
| LiveRecover, a software start-up in Austin, Texas, opted not to apply but was torn over the decision, a co-founder, Dennis Hegstad, said. | LiveRecover, a software start-up in Austin, Texas, opted not to apply but was torn over the decision, a co-founder, Dennis Hegstad, said. |
| “If there’s money flying from the sky and everyone’s grabbing it, why would you not grab it?” he asked. Then he answered his own question: “There are other people who need it more.” | “If there’s money flying from the sky and everyone’s grabbing it, why would you not grab it?” he asked. Then he answered his own question: “There are other people who need it more.” |