Khosla Ventures sent an email to founders saying that the venture capital firm would step in and cover payroll for some of its portfolio companies if they had shortfalls because of funds tied up with Silicon Valley Bank.
(Bloomberg) — Khosla Ventures sent an email to founders saying that the venture capital firm would step in and cover payroll for some of its portfolio companies if they had shortfalls because of funds tied up with Silicon Valley Bank.
The assurance is part of a broad effort by VC firms to try to contain the fallout from the bank’s collapse on companies they have invested in, including lining up financing and covering payroll for startups whose cash is now in limbo.
A spokesperson for Khosla said that the firm was in talks with more than 100 companies and was “assessing their critical needs.” It plans to provide bridge financing “at our cost of borrowing only,” for startups where Khosla was a lead or major investor, and for others in special circumstances “where a company’s investors are not able to respond.”
Another firm, Greenoaks Capital Partners, also contacted its portfolio companies to tell them the firm had money available to help them make payroll if they get caught short, according to a person familiar with the matter who asked not to be identified discussing private information. A few startups have taken the venture firm up on its offer, the person said.
Read More: Startups Are Worried About Paying People After SVB Fails
In the hours since Silicon Valley Bank collapsed, many VCs have moved to ensure their startups have the money to keep operating. “Nobody is doing this on their own,” said Pegah Ebrahimi, co-founder and managing partner of FPV Ventures. “We have cash on hand and also credit facilities at JPMorgan.”
Ebrahimi said that the firm plans to work with investors and will reevaluate its plans based on what happens on Sunday, at which point many are hoping for news of a deal or government intervention.
Other investors, including AngelList, have rushed to connect startups with loans, should they need it to pay employees and continue running on Monday.
Fintech startups like Arc Technologies Inc., Tranch Inc. and Brex Inc. have also moved to provide emergency funding to companies. Brex has received more than $1 billion in payroll loan requests from startups that have funds trapped on Silicon Valley Bank, co-CEO Henrique Dubugras told Bloomberg.
“Until the FDIC says something about how much money and when it’s going to be released, I think people are worried they’re not going to be able to make payroll,” Dubugras said.
The startup received more than 500 loan applications, mostly from venture-backed tech startups that range in size from five people to more than a thousand employees, Dubugras said. Brex, which is known for providing corporate credit cards, is working to secure third-party lenders to provide the emergency funds and plans to have the program in place by Sunday night.
Dubugras said he has seen around $10 billion in startup funds stuck in SVB accounts. He also said that Brex saw record inflows of money being deposited on its platform on Thursday as startups raced to pull their funds from the bank.
–With assistance from Michael Tobin.
(Updates with additional context from Khosla ventures in the third paragraph.)
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