The Big Story: Treasury pushes for ‘much more targeted’ small business relief. Treasury Secretary Steven Mnuchin told the Senate Small Business Committee on Wednesday that the Trump administration is open to including a new round of Paycheck Protection Program (PPP) loans in the next coronavirus relief package, although he said that any future funding “needs to be much more targeted to the industries and small businesses having the most trouble going forward.” Mnuchin added that he is loosening the program’s existing rules in order to ensure that most of the small businesses receiving PPP loans can receive at least some loan forgiveness.
The roughly $2 trillion CARES Act signed into law at the end of March set aside $349 billion in PPP loans to support small businesses struggling with the economic downturn caused by the coronavirus pandemic. While the initial funding for the program ran out in two weeks, Congress added an additional $310 billion to the program in April. Though the program has proven popular for small businesses, there have been lingering questions about PPP loan accessibility for VC-backed startups, as well as concerns about the program’s loan forgiveness requirements.
The Senate unanimously voted last week to approve bipartisan legislation to loosen existing PPP loan requirements, giving business up to 24 weeks—up from the original eight weeks—to use the emergency funding and decreasing the amount of funding that must be used on payroll expenses from 75 percent to 60 percent. The Treasury Department and the U.S. Small Business Administration released an interim final rule earlier this week that codified the legislative changes to the program.
As we’ve previously noted, however, the startup community is continuing to look for additional assistance outside of PPP loan access. The U.S. Small Business Administration said this week that approximately $130 billion in available PPP loans remain unclaimed—a fact that can be at least partially attributed to confusion about the rule’s requirements for entrepreneurs and other borrowers. With many entrepreneurs still awaiting needed relief, it’s critical for Congress and federal officials to examine other policy proposals that can bolster startups during this difficult economic time—particularly if officials are looking to target relief to the neediest small businesses.
Policy Roundup:
VC firms move to address lack of support for entrepreneurs of color. Venture capital firms and investors are beginning to reevaluate their commitment to entrepreneurs of color in response to the national conversation over systemic racism occurring in the wake of the killing of George Floyd. Just one percent of VC funding went to Black entrepreneurs in 2018, a disparity exacerbated by the fact that there were only seven Black decision makers working at the 102 largest VC firms across the country. Now, several large investment funds—such as SoftBank and Andreessen Horowitz—have announced the creation of multi-million dollar funds to specifically support underrepresented entrepreneurs.
Republicans want FCC to define Section 230 protections. Republican Sens. Marco Rubio (Fla.), Josh Hawley (Mo.), Kelly Loeffler (Ga.), and Kevin Cramer (N.D.) wrote to the Federal Communications Commission this week asking the agency to “clearly” define when online platforms should receive intermediary liability protections. Section 230 of the Communications Decency Act protects Internet firms of all sizes that make difficult content moderation decisions, but President Donald Trump has attacked the framework for allegedly allowing companies to censor conservative users and released an executive order last month to dismantle the critical protections. As we noted earlier this week, however, the framework protects user speech, promotes competition, and ensures that startups grappling with difficult content moderation decisions are free to operate their platforms as they see fit.
Democrats want platforms to take a tougher stance against misleading posts. Former Vice President Joe Biden—the presumptive Democratic nominee for president—called this week for Facebook to take a stronger stand against the spread of online misinformation and stop candidates and PACs from running ads that “spread lies,” particularly in the two week period preceding elections. The announcement came after Rep. Jan Schakowsky (D-Ill.)—chairwoman of the House Energy and Commerce Subcommittee on Consumer Protection and Commerce—said she was looking into scaling back liability protections for digital platforms that run online advertisements and other forms of commercial speech.
Tech coalition working to eradicate online child abuse materials. The Technology Coalition—a group of 18 tech companies working to combat online child exploitation—announced a five-step plan to eradicate digital child abuse content as part of its new Project Protect initiative. The coalition, which includes tech firms like Google and Facebook, said its goals include establishing a multi-million dollar research fund to develop tools for eradicating online child sexual exploitation and abuse materials, and publishing an annual report on efforts to combat the dissemination of this illegal content.
Bill would promote U.S. chip production and manufacturing. Bipartisan legislation introduced by Sens. John Cornyn (R-Texas) and Mark R. Warner (D-Va.) would allocate billions in federal funding to boost domestic semiconductor manufacturing. The bill—which comes as U.S. officials have voiced national security concerns about the production and development of chips in China—would also provide investors with a 40 percent tax credit for building U.S. semiconductor factories and purchasing equipment to manufacture chips.
Despite ban, Huawei is likely to benefit from U.S. 5G development. Despite steps by the Trump administration to bar U.S. companies from using telecommunications equipment produced by Chinese tech company Huawei over national security concerns, the firm owns the most patents for the technology needed to develop 5G wireless networks. Even if U.S. companies take the lead in developing 5G technology, Huawei’s vast patent holdings means that the firm will likely benefit financially from the use of their intellectual property.
Startup Roundup:
#StartupsEverywhere: New York City, New York. As nationwide protests over police brutality and inequality continue, industries across the U.S. are reevaluating their diversity and inclusion initiatives in order to more effectively combat systemic racism within their own ranks. One startup that has been focusing on these workplace inequalities is Dipper, a platform launched last year that lets Black and Latinx professionals share and review their company experiences in order to help other professionals of color make more informed career decisions.
Facebook is establishing a startup investment fund. Facebook is in the process of hiring tech investors to lead the company’s upcoming "multimillion dollar" investment fund to support emerging startups.
New accelerator program working to address racial injustices. DivInc—an Austin-based nonprofit organization that is working to improve diversity, equity, and inclusion across the U.S. startup ecosystem—is launching a Social Justice Innovation accelerator program to support firms working to combat systemic inequalities. Applications for the program open today.
