Entrepreneur News Roundup: June 25, 2020

Health-Focused Startups Get VC Funding, Fed Finally Launches MSLP

Startups promoting healthier lives led new funding this week. Also, news on the Main Street Lending Program and more PPP rule changes.

On Monday, the Fed finally launched the Main Street Lending Program (henceforth the MSLP because business loves acronyms), more than two months after its initial announcement. MSLP loans are processed by banks (currently there are 200 registered lenders) and the loans are 95% guaranteed by the Federal Reserve, making them favorable to lenders and borrowers alike.

Those hoping a prolonged wait would reduce in a cleaner start than the PPP endured might a little disappointed with the rollout (the Washington Post called it “rocky” earlier this week). Unlike the PPP, these funds are not forgivable, but they are low-cost loans with deferment (two years of no payments and one year of no interest).

While participation in the PPP doesn’t preclude receiving an MSLP loan, it appears this program is intended to provide support to companies that were too large for the PPP. The maximum headcount to qualify for an MSLP loan is 15,000 employees (the PPP was capped at 500). The minimum loan size is $250K, but the maximum loan is based on 4x 2019 EBITDA. Essentially, this means that if a company has zero debt currently, their 2019 EBITDA would have to be at least $62,500 to be eligible.

There are three levels to the MSLP, each with their own acronym, eligibility requirements, and terms. There’s the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).

Oh, and now Nonprofits can also apply for MLPS loans, provided they have less than a $3 billion endowment and an EBITDA of at least 5%. And that means two new acronyms coming soon: the NONLF (Nonprofit Organization New Loan Facility) and the NOELF (Nonprofit Organization Expanded Loan Facility).

If you’re not acronym-ed out yet, here’s a link to the MSLP FAQs.

Startup Funding Roundup

• Calibrate is a new weight loss program that looks at your metabolic system to help you lose weight “from the inside out.” The app integrates science and one on one coaching to help customers gain control over their weight loss. Last week they received $5.1 million in seed funding from Forerunner Ventures and Redesign Health.
• In addition to diet and exercise, another key pillar of overall health is sleep, and reports are we are getting less of it during the pandemic. Enter Tatch, a wearable sleep tracker in the form of a patch. The company received $4.3 million in seed funding from Spark Capital and Correlation Ventures.
• The American Academy of Pediatrics (AAP) recommends mothers breastfeed until their child is six months old. However, studies have shown that 80% of American moms don’t make it that long, turning instead to dairy-based formula that lacks the nutrition their babies need (and since it comes from cows, also has a high carbon footprint). Biomilq is a startup that cultures mammary epithelial cells and working towards a lab-generated human milk for babies. They received $3.5 million in seed funding led by Bill Gates’ Breakthrough Energy Ventures, with a secondary position from Purple Orange Ventures.
• In health tech, Carlsmed received $2.5 million from Cove Fund II and several MedTech VC firms. Millions of Americans need spinal surgery each year, a complex and dangerous surgery. Currently, pre-defined implants means longer surgeries and difficult post-op recovery. Carlsmed’s aprevo™ system creates a patient-specific surgical plan that includes personalized, sterile, 3-D printed implants. This round of funding will get the company through clinical trials and towards commercialization.
• Don’t worry, there’s still time for fun and games. Treehouse Games received $2.6 million from London Venture Partners. The experienced team at Treehouse Games comes from across gaming and tech, and will develop titles that focus on cooperation and collaborative gaming. They are secretive about their first title, but their products will focus on gamers who use games to socialize.
• Finally, it wouldn’t be another week in startup funding without an enterprise app. This week’s comes from Play, which allows users to design mobile apps directly on the smartphone. Part of the trending no-code/low-code movement, they received $3 million in the form of a SAFE note. Individual investors were not disclosed.

Small Business News

• The GAO, Congress’s watchdog, filed a report today that the Paycheck Protection Program (PPP) lacked oversight and safeguards, and — compounded by lack of clear guidance — will face high rates of fraudulent activity. The SBA and Treasury Department have long maintained that they would not disclose the names of borrowers. They relented last Friday, and agreed to publish the names of companies who received over $150K in PPP funds. That amounts to less than 15% of the program beneficiaries, but will account for 75% of the loan dollars. (Policico, CNBC)
• The SBA released another Interim Final Rule for the PPP this week. I’ve lost count of the number of IFRs by now, but it’s a lot of them. This week’s rule lessened restrictions on owners who had pending criminal charges. In addition, the new IFR allows for borrowers to file for forgiveness as soon as the borrowed money is expended, meaning they don’t have to wait until the end of the now 24-week window. This would allow businesses to get their loans off their books and resume their normal accounting practices. This also implies that that the full-time employee headcount thresholds will end at that point, but you will still need to pay mind on salary reductions for the entire 24 weeks. As always, talk to your tax professional. (Forbes)

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