Eligibility for Bolt Financial Loans

One-click payment processor Bolt Financial yesterday laid off a third of its workforce, just months after raising $355 million in venture capital funding valuing nearly $11 billion.

why does it matter: For some, the financial ramifications go beyond losing a salary in the future.

• In February we discussed how Bolt offered loans to employees who wanted to buy vested shares.
• We also noted that while the goal was commendable, as it can help employees cut future tax bills, the loan structure can also put employees in a bind before the employer. And that unbalanced trade-off was very dangerous (no matter how much “education” was offered).

Now we know more:

• Boltt’s loans were 51% recourse, meaning they were secured by the employee’s personal assets, while 49% were secured by shares. Any loans associated with tax coverage were 100% recourse.
• Furthermore, if an employee stops working at Bolt – for any reason – the loan must be repaid within 90 days. Imagine your boss hands you a pink slip and then reaches into your pocket, because that’s exactly what happens to some people who worked at Bolt.

Bolt spokesman He says only “one” of the laid-off employees took out the loans, even though more than 200 people lost their jobs, and the total was less than $200,000. Furthermore, she says the company plans to “work with” these individuals.

• Yes, it is welcome news that the hole is no deeper. Especially since Bolt founder and CEO at the time Ryan Breslow Tweet once More than half of eligible employees received loans. The layoffs were probably mostly from new, unearned employees. Breslow, for what it’s worth, has been radio silence about me since yesterday noon.
• But some of the remaining employees must have panicked, especially given that Bolt is suddenly backing down, being sued by a senior partner and an e-commerce enabler heading into what could be a recession. There’s some solace that loans aren’t currently underwater given the delta between 409a and project valuations, and Bolt doesn’t charge interest, but it’s a tough time to be optimistic.
• Exceptions may be employees who, instead of taking out a loan, took advantage of a different Bolt offer to extend their practice period (the duration of which was based on the term).

There was also some talk on social media yesterday that a separate company linked to Breslow had made the loans, but a Bolt spokesperson says this is incorrect (which makes sense, as these were cashless transactions). She adds that the Nasdaq private market ran the process (NPM declined to comment).

The Big Picture: This story is about Bolt, but the startup’s lawyer told me that it’s not the only startup offering these return loans. Moreover, some of them now come with “forfeiture clauses” for loans associated with the early exercise of unvested shares, where the company does not repay at cost if the employee leaves (Bolt did not have a forfeiture clause).

Bottom line: Many veterinarians of the dotcom era warned today’s entrepreneurs that these loans were a bad idea, especially given that the rhino herd was almost certain to be vulnerable. They were right.