Some Startups Went From Rescue PPP Loans to SPAC Windfalls

Another 15 companies, each valued at more than $200 million, had traditional initial public offerings within about a year of taking a loan, according to a Wall Street Journal analysis of data provided by research firm PitchBook Data Inc.

As much as $4 billion in Paycheck Protection Program loans went to venture-backed startups, according to PitchBook.

The fast track from the PPP to a lucrative public-market debut shows how after a brief time of uncertainty last spring, when startups braced for the economy to collapse, the tech industry quickly emerged as a beneficiary of the pandemic.

Low interest rates drove investors into tech, the public markets welcomed tech IPOs and a record number of SPACs sought out companies to take public through mergers.

The turnabout has also prompted disagreement among investors and executives over whether startups have an obligation to pay back the loans even if they meet the government’s standard for forgiveness. PPP loans were designed to rescue barber shops, restaurants, child-care providers and other small businesses that lacked access to other sources of funding, according to economists. Loans used mostly to pay employee salaries and meet other criteria can be forgiven, according to program rules.

“I think generally speaking, any company that produces a great outcome within say a year or two of having received a PPP loan should consider repaying it even if they technically qualify or even have already received forgiveness,” said

Albert Wenger,

managing partner at venture-capital firm Union Square Ventures.

Of the 15 highest-valued startups that received a PPP loan and went on to announce a SPAC deal or IPO, one-third have repaid the loans or pledged to repay them, according to a Wall Street Journal analysis of PitchBook data and company securities filings, and interviews with company chief executives.

It is unclear if all of those loans would have qualified for forgiveness, but in several cases, startup CEOs said they would have. Lenders process loan forgiveness according to rules outlined by the Small Business Administration, which oversees the PPP.

Scott Mercer,

CEO and founder of electric-vehicle-charging company Volta Industries Inc., said his company’s approximately $3 million PPP loan would have qualified for forgiveness, but he is paying it back now that he has a SPAC deal to raise $600 million.

“It was an invaluable tool, it helped, and we are happy to pay it back because it got us to a place of unexpected success,” said Mr. Mercer. “Back in April 2020, I had no idea what a SPAC was.”

Mr. Mercer kept his 140 employees, and like many of the CEOs involved, credits the PPP loan for allowing his startup to keep enough momentum that it could attract SPAC offers.

SPACs are blank-check companies that acquire startups to take them public, and last year they raised a total $83 billion, according to data provider SPAC Research, more than all previous years combined. Companies in the electric-vehicle sector have been among the most popular targets.

Space-technology startup Momentus Inc. and 3-D printing company Markforged Inc. each said they repaid their loans ahead of completion of their SPAC deals.

Used-car marketplace

Shift Technologies Inc.

repaid its $6.85 million PPP loan the same day it received more than $300 million from a SPAC in October.

“We have the liquidity, we have the capital we need to grow,” said Shift Co-CEO

George Arison.

“Why keep something that you don’t need?”

Other startups say they used the money appropriately and want loan forgiveness. SVB Financial Group’s Silicon Valley Bank, which counts many startups among its clients, processed some 5,000 rescue loans totaling $2.5 billion, most of which went to private tech companies. So far, around half of the companies asked for and received partial or full loan forgiveness, while about 600 repaid the loans, said spokeswoman Julia Thompson. Additional companies have requested forgiveness for loans received last year and this year, she said.

TuSimple Holdings Inc.

raised more than $1 billion last month in an IPO that gave the autonomous-trucking company a valuation of $8.5 billion. TuSimple asked the government to forgive its $4.1 million PPP loan, according to a regulatory filing. A TuSimple spokeswoman said the loan allowed it to retain more than 300 employees; she didn’t respond to questions about repayment.

Advertising-technology company

Viant Technology Inc.

had an IPO in February, and battery startup

Romeo Power Inc.

and electric-vehicle company

Canoo Inc.

went public via SPACs in December. Each company is seeking forgiveness of its loan, according to company filings. Battery maker Enovix Corp. had all of its $1.6 million loan forgiven last year and in February said it would raise $405 million in a SPAC deal, according to a company filing provided by a spokesman, who didn’t respond to further questions. Viant, Romeo Power and Canoo didn’t respond to a request for comment.

“To go back and repay the PPP loans that were forgiven makes little sense and detracts from the needs of these companies to recover and invest in their futures,” said Dave Blivin, managing director at Cottonwood Technology Fund, an early-stage venture-capital fund.

Several of the startups that took the PPP loans have little to no sales revenue, and founders said payroll would have been impossible to make. Others had no work for their customer-service, sales or factory employees.

“Our business was not in great shape,” said Jennifer Walsh, chief financial officer and chief operating officer at Shapeways Inc., a New York-based 3-D printing company with backing from Mr. Wenger’s firm Union Square Ventures. It had to halt its factory operations at the onset of the pandemic and furloughed almost half of the workers and put others on partial unemployment.

The company expects to close a SPAC deal in the third quarter that would raise almost $200 million, at which time Shapeways plans to pay back its $2 million PPP loan, even though it was already granted forgiveness.

“I would be uncomfortable keeping it,” said Ms. Walsh.

—Rolfe Winkler contributed to this article.

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Write to Heather Somerville at Heather.Somerville@wsj.com