U.S.-based technology startups can apply for financial help from the U.S. government, as part of the Small Business Administration’s Paycheck Protection Program, part of Congress’s coronavirus bailout effort.
The program offers $349 billion in loan money (and possibly another $250 billion if an expansion goes through). The so-called PPP loans turn into grants if companies keep their employees in their jobs.
In order to get money, startups have to make complicated disclosures about their investors. As part of the application process, companies are asked to certify that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant."
However, there is uncertainty in the world of startups. Most venture-backed companies are just trying to make it to their next financing round.
If the goal of the loan program is to keep people employed, there is a logic to funding startups. Employees are usually one of tech companies’ biggest costs, so cash-strapped startups lay off their employees to try to stay afloat like everyone else.
But most startups, which raised near-record levels of funding last year, possible don't need the money in the way that local restaurants need the money. The problem is that the loan program is finite. A restaurants, without any access to VCs or other forms of capital, could lose out because a startup put in an application first.