Silicon Valley Bank Closure Impacts Hundreds of Startups and VCs
The closure of Silicon Valley Bank has impacted startups and venture capital firms.
Hundreds of such firms did their banking and kept billions of dollars with the bank, which went under the receivership of the Federal Deposit Insurance Corporation (FDIC) Friday (March 10), The Information reported Friday.
That has left the bank’s clients unable to log in to their accounts, struggling to pay employees and access funds, and wondering if they can get loans.
They’re also wondering when and if they can get their money. While the FDIC said insured deposits would be available no later than Monday, most of the funds at Silicon Valley Bank — which had deep ties with the tech industry — are uninsured, the report said.
Some clients initiated wire transfers on Thursday — the day before Silicon Valley Bank’s closure — but as of Friday, didn’t know if those transfers would go through, per the report.
The Information reported that one startup cautioned staff that they would see “operational hiccups” in the next few weeks, another tried and failed to withdraw $50 million from the bank on Thursday, a third is tapping into Treasury bills and other securities and still others are trying to turn their claims on uninsured funds into cash or collateral for loans.
One investment firm that had received money from its limited partners via Silicon Valley Bank has asked them to stop sending capital to its account there, according to the report.
The bank’s collapse could have other long-lasting effects. One startup said it is concerned about future efforts to raise funds because so many investors banked at Silicon Valley Bank, while another said tech firms might not be able to find another bank that is as willing as Silicon Valley Bank was to work with them when they ran into tough times, the report said.
The California Department of Financial Protection and Innovation (DFPI) took possession of the bank and appointed the FDIC as its receiver on Friday, citing its “inadequate liquidity and solvency.”
The bank and its parent company SVB Financial Group had been beset in recent days by customer withdrawals and plummeting stock prices.
The company has said on its website that it is “the FinTech industry banking leader.”