In the wake of the recent collapse of Silicon Valley Bank (SVB), some of the tech industry’s most prominent figures are stepping up to offer personal capital to startups in need. OpenAI CEO Sam Altman and Vinod Khosla, a notable venture capitalist, have both offered loans to companies whose funds are currently locked up at SVB. As SVB is involved with nearly half of all US venture capital-backed startups, this has left many companies struggling to make payroll and meet other obligations.
Altman confirmed that he is offering a “decent amount” of personal capital to help startups that need to make payroll immediately. Khosla is offering personal loans to companies in the Khosla Ventures portfolio at borrowing cost. Both Altman and Khosla have urged other venture capitalists to offer emergency cash to startups that need it for payroll or other expenses. They emphasized that there are no documents or terms required for these loans.
However, it’s more difficult for venture capitalists who can’t invest personal capital in startups. If they use money raised from limited partners (LPs), for example, the terms will need to be stronger due to the expected upside of that capital. Hemant Taneja from General Catalyst is helping portfolio companies make payroll with “very low interest loans,” although it’s unclear whether this is personal capital or money from the fund. Other funds offering loans include Greylock, Mayfield, Kleiner Perkins, Upfront, Ribbit Capital, Redpoint, Lightspeed, and Altimeter Capital.
Some investors who had accounts with SVB are still waiting to see how much money they can offer their startups. They’re deciding on a case-by-case basis and figuring out the right terms with lawyers. They need to ensure that lending money doesn’t require a lending license, and the best practice for now is a promissory note or convertible note with a repayment feature.
Startups have been grateful for the lifeline offered by their investors. Sara Mauskopf, CEO and co-founder of Winnie, said her backers were “an incredible lifeline right now.” She’s been fortunate to have great backers who know the strength of her business and have been willing to help with the timing issue at hand. She added that her investors are not looking to make money from this but are simply looking for a legally acceptable path forward.
Erica Wenger, a former head of platform at Worklife who is currently building her own venture firm, suggests that general partners (GPs) should lean on their limited partners, particularly family offices, to close big checks for later-stage special purpose vehicles. Emerging fund managers don’t have the capital to do this themselves. Wenger noted that the legal complications surrounding how these loans and investments are structured are giving her pause.
Meanwhile, Brex CEO Henrique Dubugras is working to raise over a billion dollars in a weekend to help fund an emergency bridge credit line. He believes this will help startup customers impacted by SVB’s collapse be able to make payroll next week. Dubugras declined to comment on how much capital has been committed for the credit line so far, but he’s on back-to-back calls trying to get funds locked down.
The collapse of SVB has left many startups struggling to make payroll and meet other obligations. Fortunately, prominent figures in the tech industry are stepping up to offer personal capital to those in need. While some venture capitalists are using money raised from LPs, Altman and Khosla are offering personal loans to companies in their portfolios. Startups are grateful for the help, but the legal complications surrounding these loans and investments are causing concern for some industry leaders. Nonetheless, the outpouring of support shows that the tech community is committed to helping each other out in times of crisis.