Silicon Valley Bank’s collapse rattled the technology industry that had been the bank’s backbone, leaving shell-shocked entrepreneurs thankful for the government reprieve that saved their money while they mourned the loss of a place that served as a chummy club of innovation.
“They were the gold standard, it almost seemed weird if you were in tech and didn’t have a Silicon Valley Bank account,” said Stefan Kalb, CEO of Seattle startup Shelf Engine, during a Monday interview as he started the process of transferring millions of dollars to other banks.The Biden administration’s move guaranteeing all Silicon Valley Bank’s deposits above the insured limit of $250,000 per account resulted in a “palpable sigh of relief” in Israel, where its booming tech sector is “connected with an umbilical cord to Silicon Valley,” said Jon Medved, founder of the Israeli venture capital crowdfunding platform OurCrowd.
But the gratitude for the deposit guarantees that will allow thousands of tech startups to continue to pay their workers and other bills was mixed with moments of reflection among of entrepreneurs and venture capital partners rattled by Silicon Valley Bank’s downfall. The crisis “has forced every company to reassess their banking arrangements and the companies that they work with,” said Rajeeb Dey, CEO of London-based startup Learnerbly, a platform for workplace learning. Entrepreneurs who had deposited all their startups’ money in Silicon Valley Bank are now realizing it makes more sense to spread their funds across several institutions, with the biggest banks considered safer harbors. Kalb started off Monday by opening an account at the largest in the U.S., JP Morgan Chase, which has about $2.4 trillion in deposits. That’s 13 times more than the deposits at Silicon Valley Bank, the 16th largest in the U.S. Bob Ackerman, founder and managing director of venture funder AllegisCyber Capital, likened last week’s flood of withdrawal demands from Silicon Valley Bank’s to a self-inflicted wound by “a circular firing squad” intent on “shooting your best friend.
”Many of Silicon Valley Bank’s roughly 8,500 employees now find themselves hanging in limbo, too, even though government regulators now overseeing the operations have told them they will be offered jobs at 1.5 times their salaries for 45 days, said Rob McMillan, who had worked there for 32 years.
“We don’t know who’s going to pay us when,” McMillan said. “I think we all missed a paycheck. We don’t know if we have benefits.
”Even though all of Silicon Valley Bank’s depositors are being made whole, its demise is expected to leave a void in the technology sector that may be difficult to fill. In an essay that he posted on his LinkedIn page, prominent venture capitalist Michael Moritz compared Silicon Valley Bank to a “cherished local market where people behind the counters know the names of their customers, have a ready smile but still charge the going price when they sell a cut of meat.”
Silicon Valley Bank is fading away at a time when startups were already having a tougher go at raising money as a downturn in technology stock values and a steady ride in interest rates caused venture capitalists to retrench.
The bank often helped fill the financial gaps with one of its specialties — loans known as “venture debt” because it was woven into the funding provided by its venture capitalist customers
