Hundreds of startup companies are facing a potentially massive cash crunch in the wake of the collapse of Silicon Valley Bank (SVB), an institution designed to help finance such venture capital (VC) firms.
In a tweet, founder Nikita Bier said: “The number of growth stage companies that had their cash at SVB is huge. Making payroll next week is going to be a s—show.”Sam Lessin, a partner at Slow Ventures, told CNBC Friday a founder he had spoken to planned to cover payrolls personally and “figure it out from there.”Even startups that didn’t bank directly with SVB have been hit by its collapse. My Insider colleagues April Joyner and Madeline Renbarger reported the healthtech startup Flow Health used Rippling, which held an account with SVB, as its payroll provider.”We literally have no way of paying employees right now,” Flow Health CEO Alex Meshkin told Insider.Some startups took drastic steps on Friday to try and bring cash in. The popular toy store Camp told its customers it was in distress after its funds got trapped by the collapse.”All of our cash was at SVB and we are trying to build up our balance at Chase,” Camp CEO and cofounder Ben Kaufman told Insider via Twitter direct message.
The impact is being felt throughout California, as there appears to be another bank run poised to occur in Brentwood.
It appears the term “Extinction-Level Event” may actually be warranted in this case.
More than 100 venture capital and investing firms have signed a statement supporting Silicon Valley Bank, part of mounting industry calls to limit the fallout of the bank’s collapse and avoid a possible “extinction-level event” for tech companies.As of Saturday afternoon in San Francisco, about 125 venture firms including Sequoia Capital had signed on to the statement, spearheaded by venture firm General Catalyst, according to a person familiar with the matter. First released Friday by a smaller group of signatories, the statement called the events of the last two days “deeply disappointing and concerning,” and said that the investors would continue relationships with the institution if it were bought by another entity.Also on Saturday, the startup incubator Y Combinator posted a petition signed by hundreds of founders and chief executives to US Treasury Secretary Janet Yellen and other regulators, asking for “relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank.”The petition asked for small businesses that had deposited funds at Silicon Valley Bank to be made whole, and for Congress to “restore stronger regulatory oversight and capital requirements for regional banks.”
A scheduled Saturday afternoon briefing for members of California’s congressional delegation by officials from the Federal Deposit Insurance Corporation was reportedly postponed.
The Northern California bank’s Friday collapse marked the nation’s largest bank failure since the 2007 financial crisis and has raised concerns about ripple effects throughout the rest of the economy.Rep. Ro Khanna (D-Calif.), who represents Silicon Valley, said early Saturday on Twitter he wanted to ensure the bank’s depositors would be protected.“The Treasury Department and FDIC must communicate loudly and clearly that depositors will be protected,” he wrote. “The investors and executives of SBV should bear risk and lose. But this should not mean that workers go without paychecks on Monday or small businesses collapse.”
Between the flooding and the bank collapse, it has been a very bad week for California. I cannot stress enough how dependent the state has become on the golden eggs of the Big Tech goose.
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