Home Business Josh Kushner-linked startup axed staff three days before snagging PPP loan

Josh Kushner-linked startup axed staff three days before snagging PPP loan

22
0

A software startup backed by venture capitalist Josh Kushner axed about a third of its staff just three days before snagging coronavirus relief funds meant to help the firm preserve jobs, The Post has learned.

San Francisco-based Welkin Health laid off 10 of its roughly 30 employees on April 24 as the COVID-19 crisis sapped sales, according to three sources with knowledge of the matter.

Three days later, the health-care software provider was approved for at least $1 million from the Paycheck Protection Program, according to federal data — a forgivable loan meant to help small businesses keep people employed or rehire laid-off workers.

The April layoffs left Welkin with just about 20 employees, sources said — despite the company indicating to the Small Business Administration that it had 30 staffers, the data show.

The cuts that Welkin made before learning whether it had access to the job-saving cash go against the spirit of the $659 billion program created to protect workers during a historic economic crisis, says government watchdog Liz Hempowicz.

“The point wasn’t so that businesses could continue to exist on paper, or in a bank account,” Hempowicz, director of public policy at the nonpartisan Project On Government Oversight, told The Post. “It was so that people remained employed during this time of great economic instability.

“The practical effect here is that there’s less money in this program to go to those small businesses that do have those employees still working there,” she said.

Welkin has raised some $29 million from deep-pocketed investors in recent years, including from Thrive Capital — a venture fund run by Kushner, the husband of supermodel Karlie Kloss and younger brother of White House adviser Jared Kushner.

As The Post has previously reported, Thrive urged portfolio companies, including Welkin, to stay away from the PPP program meant for “for the smallest, most vulnerable businesses in our communities.”

“These loans are less obviously for the startup with a host of institutional investors and several years of cash in the bank, looking to extend runway,” Thrive wrote in an April 7 e-mail to startups that sought the fund’s advice on the PPP funds.

But Welkin defied Thrive’s advice, and blamed the April layoffs on the pandemic drying up its sales pipeline, sources said.

Now, sources say the layoffs could force the Silicon Valley company to pay back some of the loan instead of having it forgiven.

Companies that receive PPP money are supposed to spend 60 percent of it on payroll costs in order for the feds to convert the loan into a grant.

It could be tough for Welkin to clear that bar, said Hempowicz, because it’s “impossible” to pay people who’ve been axed.

And while PPP recipients have until Dec. 31 to rehire or replace laid-off workers and qualify for full loan forgiveness, Welkin doesn’t appear to have made any headway.

Several staffers have resigned since the layoffs, leaving the company with about 15 current employees, sources said. Welkin’s Web site had only one job listing as of Friday.

In response to The Post’s reporting, Welkin CEO Michelle Pampin said the company moved forward with the loan “after careful legal review to confirm our eligibility, as well as our review of the intent of the program in supporting small businesses.”

Pampin also said many data points and statements The Post presented were “inaccurate” but did not elaborate.

Welkin also axed roughly a dozen people a month prior to the COVID layoffs, on March 6, after losing its largest customer in February to a competitor, according to two sources.

At the time of the March cuts, Welkin VP of Finance Joe Oest told remaining staffers that the company had about “18 months of runway” and that no more layoffs were forthcoming, the sources said.



Source link