General Catalyst, Khosla Ventrues, Kleiner Perkins among companies looking to offer loans to portfolio companies
two of technology big businessmen, open AI CEO sam altman and storied venture capitalist vinod khosla, are offering personal capital to startups on the brink of SVB collapse as their money remains locked up in Silicon Valley Bank. The bank, which was shuttered and taken over by regulators on Friday, is involved with nearly half of all US venture capital-backed startups.
Beyond the fact that investing is the job of an investor, there is something to be said for using personal capital to help businesses. The rapidly developing situation is also complicated by the fact that it’s the weekend, so people can’t easily move money or don’t have liquid cash.
Altman, the former CEO of Y Combinator, confirmed to TechCrunch that he is using a “decent amount” of personal capital. He believes the money will be released next week and the loans are more to help startups that “need to pay payroll now.”
Khosla said on Twitter that he is offering personal loans at the cost of the loan to companies in the Khosla Ventures portfolio. Altman and Khosla took to Twitter to urge other venture capitalists to offer emergency cash to employees. “Today is a good day to offer emergency cash to your startups that need it for payroll or whatever. no docs, no terms, just send money,” Altman tweeted, while Khosla said the big VC firms should step up, “especially the ones taking home millions in fees.”
Khosla Ventures’ chief marketing officer, Shernaz Daver, said via email that the firm’s perspective is that using “LP capital” in this situation is “inappropriate” and that the focus of venture capital firms should not be on making money. . Daver declined to share details about how much capital Khosla has given due to the fact that it is an evolving situation.
It is a more difficult option for those who do not have the ability to invest personal capital in new ventures. If a venture capitalist uses money he raised from LP, for example, the terms will need to be stronger because of the expected upside of that capital. (A venture capitalist responded to Altman’s call to action by saying they’re offering half of his last check, on SAFE, last-round terms, using investors’ money.)
overall catalyst‘s Hemant Taneja it’s also helping portfolio companies pay payroll with what it describes on Twitter as “very low-interest loans.” It is not clear if GC is using the personal capital of the partners or money from the fund. Other funds working to offer loans, according to Taneja’s tweet, include Khosla Ventures, Greylock, Mayfield, Kleiner Perkins, Upfront, Ribbit Capital, Redpoint, Lightspeed and Altimeter Capital.
An investor, whose main fund account and management company was at SVB, is waiting on Monday to find out how much money they can offer in the first place. The investor, who spoke to TechCrunch in the background, said they are deciding the checks on a case-by-case basis and lawyers are still deciding on the correct terms for these deals. They need to make sure it’s legal, as lending money may require a lending license.
Right now, they said, the best practice is a convertible promissory note or note with a redemption feature.
Winnie CEO and co-founder sara mouse head said his venture backers are offering “an incredible lifeline right now”
“I’ve been lucky to have great sponsors who know the strength of my business and have been willing to help with this time issue,” he told TechCrunch. “Everyone is working on this right now, but my investors are not looking to make money from this at all. They are just looking for a legally acceptable path to follow.”
Erica Wenger, a former platform director at Worklife who is currently building her own venture firm, said GPs should lean on their limited partners, especially family offices, to close large checks for later-stage special-purpose vehicles. That said, she says that the legal complications around how these loans and investments are structured are giving her pause.
“If it were me, I would explore all options to make sure my portcos are covered,” he said, noting that EM fund managers don’t have the capital to do this themselves. “GPs have relationships with deep pockets. Everyone has an interest in seeing these businesses succeed!”
Other leaders in the tech world are also looking for ways to unlock cash for endangered founders. Brex CEO Henrique Dubugras is currently working to raise over a billion dollars in one weekend to help fund a emergency bridging line of credit which he believes will help startup clients affected by the Silicon Valley Bank collapse be able to pay payroll next week. Dubugras declined to comment on how much capital has been committed for the credit facility so far, but said he is on back-to-back calls trying to block the funds.
If you have an interesting piece of advice or a clue about what happened in the wake of the SVB collapse, you can contact Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Requests for anonymity will be respected.
