Knotel has raised $560 million in venture capital since 2016. But when coronavirus hit, the flex-office provider received a PPP loan between $5 million and $10 million to retain employees.
It wasn’t alone: at least two dozen proptech firms received funds through the CARES Act, according to an analysis of newly released data by The Real Deal. Among the beneficiaries is Homelight, an agent referral startup; the hospitality startup Domio; Selina, a hotel startup backed by Adam Neumann; and PeerStreet, a crowdfunding platform.
Though the federal Paycheck Protection Plan was intended to help small businesses retain jobs during the pandemic, it became a flashpoint for tech startups that rely heavily on private capital. Early on, it was unclear if startups were even eligible for PPP loans. Later, some questioned the ethics of taking a government handout.
“People seem to perceive that these companies should have access to capital in other ways,” said Clelia Warburg Peters, a venture partner at Bain Capital Ventures. But, she said, “That’s often a misperception of the way the venture market works.”
According to tech research firm PitchBook, more than 8,100 companies with private equity and venture capital backing were approved for $13.4 billion worth of loans. The majority of the loans were under $1 million.
“The idea that every tech company is venture backed and swimming in money is just not true,” said K.P. Reddy, founder of venture firm Shadow Ventures. “For a lot [of startups], their revenue went away.”
Andrew Ackerman, managing director at Dreamit Ventures, said the goal of the PPP loans was to keep businesses from falling apart for long enough that they would be around when the economy recovers. “In that respect, there are zero differences between a VC-backed tech startup or a local restaurant or any other small business,” he said.
Knotel declined to comment for this article. But on Thursday, the company said its second-quarter revenue plunged 20 percent during the pandemic. “We have been staying really focused on getting through this year,” CEO Amol Sarva said during a webinar.
According to SBA data, Homelight received a loan between $5 million and $10 million in April to retain 213 jobs. The San Francisco-based company, which declined to comment, has raised $164.5 million in debt and equity since 2012.
Domio, which has raised $116 million since 2016, got a loan between $2 million and $5 million to retain 80 jobs. So did Unison, a home financing company, whose loan covered 52 jobs. (Both declined to comment.)
Flex-office provider Serendipity Labs, which has raised nearly $100 million since 2011, confirmed that it got a $1.4 million PPP loan in April, and began restaffing its locations in May as stay-home orders were lifted. “As a result, we have already met the program requirements for full forgiveness,” it said, and plans to open eight new locations this year.
Selina, the London-based hotel and co-working company backed by Adam Neumann, received a loan between $1 million and $2 million, according to SBA data. That wasn’t the company’s only bailout: In March, the startup raised $60 million to get through the pandemic, CEO Rafael Museri said at the time. Since 2012, Selina has raised $345 million.
In the venture world (and beyond), questions have been raised about the accuracy of the Treasury Department’s data. Though they were both listed as loan recipients, heavyweight VC firms Index Ventures and Andreessen Horowitz said they did not apply for, or receive loans. Andreessen Horowitz, which was listed as having received a loan between $350,000 and $1 million to save 24 jobs, declined to comment. But Index Ventures told Protocol that the entry contained a wrong business address and incorrect information about their fund. “Our legal team is looking into why our name is listed and look to correct it ASAP,” the company said. (Both VC firms have tech companies in their portfolio that received loans.)
MetaProp, a proptech venture firm on the list, did not confirm or deny accepting a PPP loan, but declined to comment altogether. SBA data show the New York City proptech investor got a loan between $150,000 and $350,000.
Despite getting PPP loans, some startups still laid off dozens of staffers.
Real estate investing platform PeerStreet laid off 50 people in March, according to layoff tracker Layoffs.fyi. It later got a loan between $2 million to $5 million to retain 150 jobs, SBA data show. The company declined to comment.
Blueground, a luxury rental startup with more than $70 million in VC funding, laid off 130 people in late March. A month later, it was approved for a loan between $2 million and $5 million to retain 131 jobs after the pandemic “substantially impacted” the business, the company said..
And Frontdesk, a short-term rental startup, had to lay off 35 employees, or 16 percent of its staff before getting a PPP loan. “It would’ve been much worse for us had we not received a PPP loan to help us to sustain through this pandemic,” co-founder Jesse DePinto said.
Reddy said some smaller companies worried that if they took a PPP loan, they may not be able to pay it back. Others, however, recognized that their ability to develop a new product or tool requires staff. “It’s not like the services companies where you can just cut back,” Reddy said. “You still need the people to finish the product, so you get kind of stuck.”
A handful of startups that got PPP loans also sewed up venture funding during the pandemic, including Sundae, a residential real estate marketplace, which announced a $16.55 million Series A on June 1. Sundae landed a loan between $350,000 and $1 million, according to the SBA. EasyKnock, which buys homes and allows sellers to stay as tenants, announced a $20 million funding round in mid-June. The company got a loan between $350,000 and $1 million to retain 10 jobs, according to SBA data.