Ashley Tyrner opened an account at Silicon Valley Bank for his company, FarmboxRx, two years ago. He was preparing to raise venture capital and knew that the bank was an option for the start-up industry.
On Thursday, after reading about financial instability at the bank, he hurried to transfer the money from FarmboxRx to two other bank accounts. Your bank transfers did not go through. And on Friday, Silicon Valley Bank collapsed, tying up cash totaling eight figures for his company, which delivers food to Medicare and Medicaid participants.
“None of my representatives will call me back,” Tyrner said. “These are the worst 24 hours of my life.” His despair it was part of the fallout on the startup ecosystem from the failure of Silicon Valley Bank. Entrepreneurs rushed to get payroll loans because their money was frozen in the bank.
Investors handed out and sought advice in memos and on emergency conference calls. Lines formed outside the bank’s branches.
the implosion rocked an emerging industry that was already on the brink. Hit by rising interest rates and an economic slowdown over the past year, seed funding, which had been burdened by low interest rates for years, has been cut, leading to mass layoffs at many young companies. , cost cuts and reduced valuations.
in fall
Investments in US start-ups fell 31 percent last year to $238 billion, according to PitchBook. On top of that, the fall of Silicon Valley Bank was especially troubling because it called itself a “financial partner of the innovation economy.”
The bank, founded in 1983 and headquartered in Santa Clara, California, was deeply enmeshed in the tech ecosystem and provided banking services almost half of all science and technology companies backed by companies in the United States, according to their website.
Silicon Valley Bank was also a bank for more than 2,500 venture capital firms, including Lightspeed, Bain Capital and Insight Partners. He managed the personal wealth of many tech executives and was a stalwart patron of Silicon Valley tech conferences, parties, dinners and media outlets.
The bank was a “systemically important financial institution” whose services were “immensely startup-friendly,” said Matt Ocko, an investor at venture capital firm DCVC.
On Friday, the Federal Deposit Insurance Corporation seized control of Silicon Valley Bank’s $175 billion in customer deposits. Deposits of up to $250,000 were insured by the regulator. Beyond that, heCustomers have not received information on when they will regain access to their money.
That left many of the bank’s customers in a bind. On Friday, Roku, the TV streaming company, said in a filing that approximately $487 million of its $1.9 billion in cash was linked to Silicon Valley Bank. Most of the deposits were not insured, Roku said, and he did not know “to what extent” he could recover them.
They can’t get the money
Josh Butler, CEO of CompScience, a security analytics start-up, said that he couldn’t get his company’s money out of the bank on Thursday or before the bank’s collapse on Friday. The last day, she said, had been stressful.
“Everyone from my investors to employees to my own mother are reaching out to ask what’s going on”, Butler said. “The big question is how soon will we be able to access the rest of the funds, how much, if at all? That is absolutely terrifying.”
CompScience was pausing spending on marketing, sales, and recruiting until it resolved more pressing concerns, such as payroll. Butler said that he was prepared for a major crisis, given the pessimism that swirled around the industry.
But “did you expect it to be Silicon Valley Bank?” he said. “Never”. Camp, a start-up that sells gifts and experiences for children, added a banner to its website Friday that read: “OUR BANK JUST CLOSED SO EVERYTHING IS FOR SALE!”
The site offered a 40 percent discount with the promo code “bankrun” along with a meme that included the words “never liked the bay area” and “how could this happen”. A representative for Camp said the sale was related to the collapse of Silicon Valley Bank and declined to comment further.
Sheel Mohnot, an investor in Better Tomorrow Ventures, said his venture firm on Thursday advised his startups to transfer money to treasury bonds and open other bank accounts out of prudence.
“Once a bank run has started, it’s hard to stop it,” he said. Some of the startups Mohnot’s firm has invested in chose not to move their money, while others were unable to act in time before the bank failed, he said. Now his biggest concern was doing payroll, followed by figuring out how to pay his bills, he said.