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How to Make Sense of the PPP Loan Program for VC-Backed Startups



There is so much confusion and misinformation out there about the government sponsored “payroll protection plan” loans to companies that the heads of every small business CEO in the country must be spinning. We have been advising a lot of entrepreneurs so I thought I’d “open source” some of the advice I have been sharing.

I am not claiming to be the world expert on this. But I have been in close contact with the NVCA, many of the major law firms and many of the major VC firms. Along with my partner Stuart Lander, who runs operations at Upfront and is a former lawyer, we have scoured through, debated and helped scores of companies make this determination. So my only goal is to give you insights into the conversations we’ve been having in case you don’t have the same access or advice.

I am not a lawyer nor can you use my advice for the basis for your application but I’d rather provide more public information to help you have the right conversations so please take this posting for what it is (and accept that I may have typos or inaccuracies, which I will amend if pointed out).

Am I eligible for the PPP Loan?

If your US-based business is adversely affected by Covid-19 such that you would need to lay off employees imminently and having access to capital would enable you to keep more employees on the payroll then you might be eligible. You need to:

  • study the rules,
  • make sure that you don’t violate the “affiliate rule” (more later),
  • consult with your Company Counsel,
  • consult with your board and investors and then make your own determination.

If you do apply you must certify that your information and application are true and honest.

Who is this program for and why does it exist?

The CARES (Coronavirus Aid Relief & Economic Security) Act provides $2 trillion to businesses and individuals affective by Covid-19.

$350 billion of this money is dedicated to small businesses under a loan program called the PPP (payroll protection plan). This money is administered by the SBA (small business administration) and is obtained through an approved bank who reviews your application.

The goal of the program is in the name — payroll protection. The US government believes that keeping more workers employed, even if they’re not immediately productive due to WFH (work from home) or loss of revenue is better than all of these employees being laid off, where they will likely seek relief via unemployment insurance claims. There were 10 million claims in the past 2 weeks alone, the largest 2-week request in history. The government believes that it not only is better keeping employees in jobs where possible but also in helping these businesses remain solvent.

Am I ineligible since I’m VC-backed?

There is nothing in the rules that state that VC-backed businesses are ineligible. There are certainly some people who are publicly saying that VC-backed businesses shouldn’t take government money. There are some business people who think this is ethically wrong for a VC-backed business with a highly-educated founder and there are also likely to be some populist outcries that the money should have been reserved for Main Street workers and not tech workers.

This is a matter of opinion or belief system but not a matter of legislation or policy. The program is designed to keep employees on the payroll so ultimately it’s up to you to decide whether you are a worthy recipient and to weigh the benefit to your company and your employees against the potential perception the market may (or may not) have in the future.

One thing that is clear. If you plan to lay off employees and if the PPP Loan will help you to keep more people on your payroll and you ultimately believe that getting through the next couple of months will enable you to productively employ these people on your own dime in the future — this is precisely the policy goal of the US Government. Perception is not equal to policy or legislation. If you want to be perceived well in the future then make sure that your grounds for applying are sound and that you’re truly preserving jobs.

If the US Government didn’t want to support VC-backed businesses they easily could have excluded them and they knowingly did not.

I am hearing from all of my peers that everybody’s applying — shouldn’t I?

The short answer is “no.” Applying for a government loan that was created to serve US small businesses and employees in the times of an economic crisis is not something you should do just because all of your peers are telling you that you should. It is not “free money.” You should apply if your business is in duress, if the loan can help you preserve jobs, if you qualify and if you’re supported by your board and your investors.

Do I need to repay the loan?

You might. It depends. Below lists how the loan program is calculated. If you maintain your employment level at your current rate much of this loan can be forgiven but it’s likely that a portion of it will not be. If you do massive layoffs (RIFs) you can assume that you will need to repay your loan since the intent of the loan is to protect jobs.

Do I need to rush my application?

One of the most unfortunate aspects of the legislation is that it states that applications will be approved on a first-come, first-served basis. That means that every business who believes it qualifies is rushing in its applications, which doesn’t leave much time for reasoned discussions with your relevant stakeholders on whether or not you should and it means that banks and lawyers are being forced to rush things. I get that in a crisis the government needs to act quickly and fix things later. But this FIFO approach has created undue urgency. So sadly you do need to rush things if you want to improve your chances of being approved.

Why is there so much confusion about whether banks accept applications?

Banks have a difficult task. They don’t want to hand out loans and later learn they gave money to fraudsters. They have regulations that dictate things like KYC (know your customer) and AML (anti money-laundering) and other regulations designed to avoid abuse of our financial institutions. As a result, many banks are only taking applications from existing customers and in some cases only customers who have existing credit arrangements. Additionally, some Main Street banks aren’t able to process VC-backed applications because they are designed to handle individual owned, local businesses.

The two primary banks that service the VC industry are SVB (Silicon Valley Bank) and FRB (First Republic Bank) and both understand the intricacies of VC-backed businesses and are more easily able to assist you.

Everybody is talking about the “Affiliate Rule” — what is that?

Ok. Now things get complicated.

Step 1 is deciding “am I qualified for a loan under the rules” and step 2 is determining whether or not you can validly apply based on something called the “affiliate rule.” It’s complicated but essentially if a SINGLE VC can veto certain actions that are approved by the board then you violate the Affiliate Rule (or if a single firm owns > 50%). There is a lot of chatter about companies that own > 20%. This is completely unrelated to the Affiliate Rule. The application form states that any > 20% owners must disclose certain information in the application process so it often gets confused as being related. It is not. The NVCA (National Venture Capital Association) Guidelines are below.

Am I free and clear as long as no investor owns more than 20% of my company?

No. This is another misconception. The 20% threshold has nothing whatsoever to do with eligibility. It simply determines whether you have to provide additional information.

So to be clear, if a company owns 8% of your company but has negative blocking rights as outlined above in the NVCA guidelines, you are ineligible for the program unless you modify your legal governing documents.

How do I amend my legal documents so that the Affiliate Rule doesn’t stop me from applying for a loan?

For starters you will require investor consent to amend your governing documents and since some of these terms were negotiated to protect shareholder rights they may approve the changes and they may not.

I have found that it is easier to get VCs to amend the governing documents when there are several VC investors such that none has the overwhelming majority ownership relative to others. This is because the affiliate rule is only tripped if one single firm has blocking rights. Therefore you can amend the governing documents to a “simple majority of the preferred shareholders” can block one of the known affiliate rules rather than a single firm. I have found VCs to work collaboratively on these to help entrepreneurs in this time of need.

It’s slightly harder if you’ve only done an A-round and therefore have just one VC around the table who owns more than a majority of the preferred stock. In this instance they would need to give up the right entirely. If your company is in dire straits (let’s say you’re a transportation company or a hospitality company) then you’re likely to find an amenable investor. If you’re in a company where the investor views your application as more of a “gray area” then you may not easily receive consent for changes.

Finally, there are several discussions about how to “get around” the Affiliate Rule. Please be careful because having a “side agreement” (verbal or written) to “spring back” to the old agreement in the future is tantamount to fraud. You can expressly mention that the governing docs are only valid for the period of the loan but I believe this may open you up to the SBA second guessing the validity of your loan on a “look back basis” (meaning in the future they come back and state that you violated the rules).

If you’re going to amend, then amend. If you’re playing games — don’t apply.

When the $350 billion is fully invested will more be made available?

Nobody knows for sure. There are lots of discussions about the need for more stimulus and the lasting effects of the Coronavirus, etc. Ultimately whether there is a further SBA stimulus will depend on whether it was deemed effective, whether the crisis is longer-lasting and deeper than expected and whether handing more money to small businesses is deemed politically acceptable.

I’m getting so much conflicting advice, whom should I listen to?

Ultimately it is up to you to make the determination if the PPP Loan program is meant for you. You should have a discussion with your legal counsel first. You should discuss with your board second. You should discuss it with your investors third. If you are convinced after this that you are eligible and worthy, then the only remaining thing before applying is to decide how the markets will judge your actions in the future. If you saved jobs, saved your company and are a productive member of our economy and if you feel that this program played an important role in helping you succeed and you didn’t have other options that were as immediately able to help — you can at least sleep better at night believing that this SBA Program met its intended goal.

How to Make Sense of the PPP Loan Program for VC-Backed Startups was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.



Hodlnaut Awarded $6,000 in Costs As Court Rejects Craig Wright’s Appeal



Craig Wright, the self-proclaimed Satoshi Nakamoto, has seen another failure in his ongoing legal battle against the popular cryptocurrency proponent going by the Twitter handle Hodlonaut. The Supreme Court in Norway rejected Wright’s jurisdiction appeal.

CSW Vs. Hodlonaut: The Backstory

Craig Wright has attracted lots of attention to himself, especially after claiming on numerous occasions that he’s the person behind the anonymous pseudonym, Satoshi Nakamoto. However, as he had failed to provide conclusive evidence that he is indeed Bitcoin’s creator, lots of community members have openly refuted his claims.

One of the most vocals doubters from the start has been the Twitter user Hodlonaut. As a result, Wright sued him last year but without much success so far. As CryptoPotato reported in January 2020, the United Kingdom High Court dismissed his defamation case because it didn’t have jurisdiction.

Nevertheless, the case continued in another European country – Norway. Several months later, the Norwegian Court of Appeals denied Wright’s appeal, and he had to pay all costs associated with the legal case.

Hodlonaut later shared an update asserting that two months after the Court’s ruling, Wright hadn’t “paid a cent.” However, Wright had no intention to seize his case.

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Craig wright
Craig Wright. Source: Medium

Another Rejection For CSW

Earlier today, Hodlonaut provided another update on the ongoing case, which again wasn’t in Wright’s favor. Per the tweet, the Supreme Court in Norway rejected Wright’s jurisdiction appeal and awarded Hodlonaut another $6,000 on top of the $60,000 that he is owned from the previous rejection.

Despite the positive news for Hodlonaut, the “real” case will continue in Norway until a final verdict. However, he seemed rather optimistic about his chances and said that “another loss surely awaits him [Wright].”

Another one of Wright’s legal battles also received an adverse outcome for the self-proclaimed BTC creator. A US District Court recently denied “on all grounds” his motion to dismiss the Kleiman vs. Wright lawsuit, where he fights the estate of his deceased former partner over 1.1 million bitcoins.

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BTC Price Analysis: September Monthly Candle Likely Close In Red, How Bad Is It For Bitcoin?



September has never been a particularly great month for Bitcoin’s price historically, and this year has cemented that fact.

Assuming prices will remain where they are at the close, Bitcoin prices will be down 7.5% from the monthly open. Last year during September, the asset fell 13.5% and the year before that it was down 5.96%.

In spite of this, however, the leading crypto could possibly end the quarter with the second-highest close ever if it can stay above $10,590 – according to data from Skew.

While it’s highly unlikely we’ll see it break the current all-time high from Q4 of 2017 at $13,660 this time around, we are about to enter into one of Bitcoin’s better-performing months which might just give us that new yearly high we’ve all been hoping for.

Bitstamp BTC/USD 4-Hour Chart

bitcoin price
BTC/USD chart via Tradingview

BTC Price Levels to Watch in the Short-term

On the 4-hour BTC/USD chart, we can see that Bitcoin’s price still remains inside the rising channel (orange) and has recently returned to the lower channel support at $10,680 following a sharp rejection at the weekly open resistance ($10,780).

This particular price point is also being reinforced by the 200-EMA, which will make this level even more difficult to break in the short-term.

The median line of the channel (dashed white line) will now likely act as a temporary resistance as bullish traders attempt to recover from the dip.

Looking further down, if selling momentum continues to rise over the next few candles we could see BTC get kicked out of the channel. In that event, the $10,570 level may create a reaction as it has acted as both a support and resistance in the last 9 days. Right under that, we also have the much-larger channel support (yellow) which should halt any further decline (for now).

Over the short-term, we should wait until BTC prints a new higher high above $10,780 and the daily open at $10,839 before assuming the intra-week trend has turned bullish.

Total market capital: $348 billion

Bitcoin market capital: $198 billion

Bitcoin dominance: 57.0%

*Data by Coingecko.


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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


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Bitcoin Mimics Wall Street and Climbs Above $10,800 as Altcoins Rejoice (Market Watch)



Despite briefly dipping to $10,660, Bitcoin has slightly increased in value since yesterday and trades above $10,800. At the same time, Ethereum has spiked by about 2% to above $360, while more volatility is evident from lower and mid-cap altcoins.

Bitcoin To Above $10,800

After an unsuccessful attempt to conquer $10,800 yesterday, Bitcoin headed south and bottomed at about $10,660. However, the bulls intercepted the brief price dip and didn’t allow further declines.

Just the opposite, BTC started accelerating again and reached its intraday high of $10,850 (on Binance). Although the asset has decreased slightly, it’s still about 1% up on a 24-hour scale, and it hovers around $10,800.

From a technical standpoint, Bitcoin has to overcome the first resistance at $10,840 before heading towards the psychological level at $11,000. Alternatively, the primary cryptocurrency could rely on $10,680, and $10,570 as support in case of a price breakdown.

BTCUSD. Source: TradingView
BTCUSD. Source: TradingView

Bitcoin’s increase seems to be a correlation with the US stock market. The S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average all closed yesterday’s trading session with about 1% gains.

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However, gold demonstrated untypically high volatility. The precious metal spiked from $1,880 to $1,900, dropped back down and repeated the move once again in a matter of hours. On a 24-hour scale, though, gold has decreased by about 0.5%.

Ethereum Rises Above $360, Cardano Back To Top 10

Ethereum has finally increased above $360 after a near 2% jump. Ripple and Bitcoin Cash marked minor gains and are situated approximately at the same levels as yesterday – $0.241 and $228, respectively.

The most impressive performer from the top ten is Cardano. By increasing with 5% to over $0,10, ADA has actually surpassed Coin for the coveted 10th spot.

Cryptocurrency Market Overview. Source:
Cryptocurrency Market Overview. Source:

Monero is the only top 20 coin that has surged by a double-digit percentage. XMR has jumped by 12% and trades at $110. On a weekly scale, Monero is up by 25%.

Further double-digit price increases come from lower and mid-cap altcoins. DigiByte leads by a 16% surge, Maker (13%), Zcash (11%), Swipe (11%), DFI.Money (11%), Algorand (10.5%), and Zilliqa (10%) follow.

On the other hand, The Midas Touch Gold has lost the most value since yesterday – 15%. THETA (-7%), Hyperion (-6.5%), Energy Web Token (-5.5%), and Uniswap (-4.5%) follow.

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


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