Local start-ups reflect on Silicon Valley Bank failure
The initial weight of the Silicon Valley Bank collapse fell on the shoulders of many San Diego startups, who were faced with the unprecedented challenge of managing and accessing millions in funds, much of which were locked in SVB, the most prominent bank for technology and startup industries.
The collapse was triggered by a statement from SVB on March 8 announcing the sale of $21.5 billion in federal government securities at a $1.8 billion loss, according to the Wallstreet Journal. Panic spread through the venture capitalist and business community, with many taking to Twitter to advise depositors to withdraw their money. A bank run ensued, and on March 10, SVB collapsed and was taken by the FDIC.
Luckily, some companies, like Trust and Will, a San Diego-based startup, decided to withdraw most of their money before the collapse, in part motivated by “credible” advice on Twitter, out of fear of not making payroll.
“This was a Twitter-led bank run,” CEO of Trust and Will Cody Barbo said. Other San Diego startups that were late to react, like Luna Diabetes, were not as fortunate.
“All of our money was inaccessible,”
John Sjolund, the CEO of Luna Diabetes, said. “It was really scary.”
After two days of uncertainty, the first sign of light for many startups came when the FDIC announced on March 12 that SVB customers would have access to all their deposits starting the following day.
By March 13, depositors, including Trust and Will and Luna Diabetes, began recovering their assets and emerged from the frenzy shaken up, but unscathed.
“The whole world was falling apart for two days. [Now], it’s business as usual,” Barbo said.
Both Barbo and Sjolund have already opened several deposit accounts with more established banks, such as J.P. Morgan and Bank of America, to protect against a future collapse.
The collapse is also a message to government regulators that there is not enough oversight on regional banks like SVB, according to Mike Freeman, a business reporter for the San Diego Union-Tribune.
“Someone should have been sounding the alarm, that someone being the San Francisco Fed,” he said.
For investors, the SVB collapse, which has been largely attributed to interest rate dynamics, raises an important question, according to Samvit Ramadurgan (‘10), a founder of multiple investment firms: “What will the macro impact of [interest] rates mean for investing?”
While the shockwaves of the SVB collapse reverberated through the global banking industry, for most startups, including Sjolund’s, it merely “made for a really crappy weekend.”
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