Startup companies are in “deep trouble” after the collapse of Silicon Valley Bank on Friday, according to Stephanie Raul, a senior business analyst at NBC.
“#SVB was one of the largest providers of “venture debt” to startups. Often, as a requirement, startups had to keep their main bank account with SVB. Those companies are in deep trouble (unless that they don’t get all their $ out on the last day),” Raul wrote in a tweet.
The Associated Press reported that Raul’s tweet came amid economic speculation following the collapse of the bank, which was the second largest bank to fail after the collapse of Washington Mutual in 2008.
“Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC immediately transferred all insured deposits of Silicon Valley Bank as receiver to DINB,” the Federal Deposit Insurance Corporation (FDIC) said in a statement Friday .
“As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and approximately $175.4 billion in total deposits,” the FDIC said. “At the time of termination, the amount of deposits that exceeded the insured limit was undetermined. The amount of uninsured deposits will be determined after the FDIC receives additional information from the bank and customers.”
The Silicon Valley bank was widely used by technology companies as well as venture capital-backed startups. Shortly after Friday’s drop, several startups issued statements addressing the news.
Parker Conrad, CEO and co-founder of startup company Ripple, posted a series of tweets addressing the fallout.
“Ripling has historically relied on SVB for payment rails for our payroll and other products. In light of yesterday’s news, we immediately accelerated the planned switch to JPMorgan Chase,” Conrad said. “Effective immediately and going forward, Ripple payroll runs will be processed through JPMC. However, pay runs have not been paid in flight for today from SVB. This morning we heard from SVB that this was an operational delay and the fund shall be free.”
Mark Canis, Department Chair and Professor of Entrepreneurship and Innovation at the University of San Francisco School of Management, told newsweek that “to the extent that even funding from SV Bank becomes less available, this will put some additional pressure on startups.”
Brad Hargreaves, founder of several startup companies, tweeted on Friday that the bank’s collapse “is going to have a massive impact on the tech ecosystem. SVB was not only a major player in tech, but highly integrated in some non-traditional ways.”
“One, SVB was incredibly integrated into many of the founders’ lives. Not only their startup’s bank and lender, but also providing personal mortgages and other financial services,” he wrote. “Now they may not be able to do payroll next week. Unpaid wages pierce the corporate veil, so boards are *incredibly* sensitive to employing workers they may not be able to pay. Later today In the U.S., expect mass layoffs on Monday.”
newsweek Reaching out to Silicon Valley Bank via email for comment, the FDIC was directed to the statement.
Credit: www.newsweek.com /