Ben Franklin 4 PA
Apr 1, 20206 min
MARCH 30, 2020/BY DEVIN MILLER
126 pro-startup groups representing 39 states urge Trump Administration to save startup jobs by fixing SBA rule
FOR IMMEDIATE RELEASE
March 29, 2020
Contact: Cassie Ann Hodges
Phone: 202-864-5923
Email: chodges@nvca.org
WASHINGTON, DC – TechNet and the National Venture Capital Association today led 126 local, state, regional, and national groups representing 39 states across the country in urging the Trump Administration to ensure startups and their workers are eligible for the emergency relief loan program included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The full letter and list of signatories is below and is available as a PDF here.
The groups sent a letter to the Administration this afternoon regarding startups with equity investors being forced to potentially count employees from unrelated companies as their own employees – pushing startups over the 500-employee threshold that is used to determine eligibility for the loan program, under the Small Business Administration’s (SBA) Affiliation Rules.
In 2019, 2.27 million Americans worked at startups. According to the job site Indeed, 98 percent of firms have fewer than 100 employees and between small and medium sized companies, they jointly employ 55 percent of employees. Without access to this loan program, some of these startups could face preventable layoffs and be forced to shut down research and development projects that could set back our country’s competitiveness, as well as delay new tools to combat the COVID-19 pandemic.
“[W]e are gravely concerned that application of the current Small Business Administration’s (SBA) ‘Affiliation Rules’ to these companies will create confusion and delays in administering the program, and could effectively exclude many startups that are trying to survive this economic crisis,” the letter states. “Such a result would be contrary to the intent of the legislation to provide assistance broadly across all sectors of the economy. Without clear guidance enabling startups and small businesses supported by equity investment to access the loan facility, many of these startups may be rendered ineligible.”
TEXT OF LETTER:
Dear Secretary Mnuchin and Administrator Carranza:
Thank you for your service to our nation and support for America’s small businesses and their workers, especially during this challenging time.
We, the undersigned organizations representing America’s startup community, respectfully urge you to clarify as quickly as possible that small businesses with equity investors will not be excluded from the 7(a) loan program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In particular, we are gravely concerned that application of the current Small Business Administration’s (SBA) “Affiliation Rules” to these companies will create confusion and delays in administering the program, and could effectively exclude many startups that are trying to survive this economic crisis. Such a result would be contrary to the intent of the legislation to provide assistance broadly across all sectors of the economy.
The CARES Act takes many positive steps forward to provide relief to the U.S. economy. However, the goals of the program will be undermined if the “Affiliation Rules” prevent many small companies with equity investment — as is the case with most startups — from qualifying for the emergency relief made available by the CARES Act. This relief is intended for companies with less than 500 employees, other firms that qualify based upon eligible size standards, and entities that already have an explicit waiver. Depending on how the SBA assesses questions of “control” under current “Affiliation Rules,” many of these companies could be required to aggregate the employees of unrelated companies in which their investors are affiliated and count them in their employee count, pushing many above the employee size threshold. Regardless of the purpose of these rules for traditional 7(a) loans, allowing the rules to exclude some of our country’s most innovative startups in this new loan program is manifestly contrary to the intent of the legislation: to help small businesses keep their lights on and their employees working despite the double financial squeeze created by the economic and financial market downturns.
Without clear guidance enabling startups and small businesses supported by equity investment to access the loan facility, many of these startups may be rendered ineligible. The confusion alone could lead to waves of preventable layoffs. These layoffs will also have broad short-term downstream economic consequences, including for service-oriented businesses like restaurants, coffee shops, and bars, who rely on these workers as customers.
In addition to laying off workers, startups will have to shut down critical research and development (R&D) projects in fields like bio-research, medical technology, and artificial intelligence, setting back our country’s competitiveness and delaying the creation of new tools to combat the COVID-19 pandemic. Bottom line: not providing this critical support to startups now will cause both short-term pain and long-term consequences that linger for years.
In 2019 alone, 2.27 million jobs were created in the U.S. by startups across our nation. According to the job site Indeed, 98 percent of firms have fewer than 100 employees and between small and medium sized companies, they jointly employ 55 percent of employees. When implementing the CARES Act, we urge the SBA to issue guidance that makes clear affiliation rules do not arbitrarily exclude our most innovative startups. Thank you for considering our concerns.
Sincerely,
National Organizations
TechNet
National Venture Capital Association
Technology Councils of North America
Engine
Advanced Medical Technology Association (AdvaMed)
Biotechnology Innovation Organization (BIO)
Center for American Entrepreneurship
Angel Capital Association
Medical Device Manufacturers Association
Female Founders Alliance
Information Technology Industry Council (ITI)
Clean Energy Business Network
Blockchain Association
StartOut
Commercial Spaceflight Federation
LatinX VC
Hello Alice
Dental Trade Alliance
State Science & Technology Institute (SSTI)
Regional Organizations
Mid-Atlantic Venture Association
Mid-America Healthcare Investors Network
New England Venture Capital Association
Rocky Mountain Venture Capital Association (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming)
Southeast Life Sciences
Western Association of Venture Capitalists
Alabama
Tech Birmingham
Arizona
Arizona Bioindustry Association, Inc. (AZBio)
Arizona Technology Council
California
Alliance for SoCal Innovation
Bay Area Council
BioCalifornia
Biocom – Life Science Association of California
California Technology Council
California Business Incubation Alliance
California Cybersecurity Information Sharing and Analysis Organization (CalCISO)
California Life Sciences Association
Octane
Silicon Valley Leadership Group
sf.citi
Tech San Diego
Colorado
Colorado Technology Association
Rockies Venture Club
Delaware
Delaware BioScience Association (Delaware BIO)
Florida
BioFlorida
Domi Station
eMerge Americas
Florida Medical Manufacturers Consortium (FMMC)
Florida Venture Forum
Georgia
Technology Association of Georgia
Indiana
Indiana Health Industry Forum
Indiana Technology & Innovation Association
TechPoint Indiana
Illinois
1871
Illinois Biotechnology Innovation Organization
Illinois Venture Capital Association
MATTER
mHUB
Open Prairie
TechNexus Venture Collaborative
Iowa
Iowa Venture Capital Association
Kansas
KC Tech Council
Wichita Technology Corporation/Wichita Technology Ventures
Kentucky
Technology Association of Louisville Kentucky
Maine
Startup Maine
Maryland
Maryland Tech Council
Massachusetts
Massachusetts Medical Device Industry Council (MassMEDIC)
Mass Technology Leadership Council
Michigan
Ann Arbor SPARK
Michigan Biosciences Industry Association (MichBio)
Michigan Venture Capital Association
Minnesota
Medical Alley Association
Missouri
Arch Grants
BioGenerator
BioSTL
Cortex Innovation Community
KCRise
KC Tech Council
Missouri Biotechnology Association (MOBIO)
Technology Entrepreneur Center
Nebraska
Invest Nebraska
New Jersey
HealthCare Institute of New Jersey (HINJ)
New Jersey Tech Council
New York
MedTech (NY)
NY Tech Alliance
Tech:NYC
Upstate Capital Association of New York
North Carolina
Council for Entrepreneurial Development
North Carolina Biosciences Organization (NCBIO)
North Carolina Technology Association
Ohio
Cintrifuse
JumpStart
VentureOhio
Oklahoma
36 Degrees North
Oregon
Oregon Bioscience Association
Technology Association of Oregon
Pennsylvania
Ben Franklin Technology Partners
Life Sciences Pennsylvania
Philadelphia Alliance for Capital and Technologies
Pittsburgh Technology Council
Pittsburgh Venture Capital Association
Rhode Island
Tech Collective
Tennessee
EO Nashville
Greater Memphis IT Council
Greater Nashville Technology Council
Texas
Austin Tech Alliance
Austin Chamber of Commerce
Caruth Institute for Entrepreneurship
Geekdom
Houston Exponential
The Ion
Kauffman Fellows
Launch SA
MassChallenge Texas
Rice Alliance for Technology & Entrepreneurship
Southwest Venture Forum
Texas Healthcare & Bioscience Institute
Texas Venture Capital Association
Utah
BioUtah
Silicon Slopes Commons
Vermont
Vermont Technology Alliance
Virginia
Northern Virginia Technology Council
Roanoke-Blacksburg Technology Council
Washington
Life Science Washington
Washington Technology Industry Association
Wisconsin
BioForward Wisconsin
TitletownTech
Wisconsin Technology Council
Wisconsin Venture Capital Association
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About TechNet
TechNet is the national, bipartisan network of technology CEOs and senior executives that promotes the growth of the innovation economy by advocating a targeted policy agenda at the federal and 50-state level. TechNet’s diverse membership includes dynamic American businesses ranging from startups to the most iconic companies on the planet and represents over three million employees and countless customers in the fields of information technology, e-commerce, the sharing and gig economies, advanced energy, cybersecurity, venture capital, and finance. TechNet has offices in Albany, Austin, Boston, Chicago, Olympia, Sacramento, San Francisco, Silicon Valley, Tallahassee, and Washington, D.C.
About National Venture Capital Association
The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the US venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.