This is an anonymous post from an Elpha member.

SOS!!! SVB bank has gone under. Have you been impacted by SVB closing down?

Sierra166·Mar 10, 2023

Posted in:Fundraising Society & Culture Startups Money

Just last month I attended one of their great fundraising workshop events... thankfully haven't incorporated or I would probably have an acct with them right now:(

I was around in 2008 and worked in finance then, so this reminds me of what happened with Lehman and other banks. This will surely impact start ups and fundraising ... hoping y'all are ok. Concerned about smaller companies. It will take a little to figure out how exactly this will impact VC companies in general.

Filomena21·Mar 10, 2023

It seems like the established VC firms like Sequoia and Andreessen or established early stage investors like Y Combinator should be investing in SVB (or banks like it) to shore up their balance sheets. They are the ones who are gonna be pissed long-term if their portfolio companies can't open or use their bank accounts.I'd imagine this will also majorly impact FinTechs that serve startups, such as Brex.

rkwalton·Mar 12, 2023

I have a friend who invested in Brex. Per her, they're currently giving out bridge loans to companies dealing with this SVB fallout. Organizations that were well-managed will get through this and will be able to help.

Filomena21·Mar 12, 2023

I'm hearing that as well, and as a Brex customer received communications about it, but I think it's still a big risk that Brex is taking. There are rumors that SVB customers will receive back 90% of their uninsured deposits, and if that's true, then it's very smart for Brex to be there for its customers in a difficult time.But if SVB truly fails and depositors get back 50% or less, Brex would be left holding the bag. Perhaps they are being selective about whose bridge loans get approved (e.g., only profitable startups). Will be interesting to observe.

rkwalton·Mar 13, 2023

I think we all need to not lean into what can make this worse: fear and worry.Bank runs indicate a lack of confidence. Yesterday, the Feds issued a joint statement yesterday at 6:15 pm Eastern: https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htmMy theory is they did that to get ahead of the Asia markets opening up. I'm aware of that time difference as I lived in NE Asia for almost a decade. They wanted to send a signal to the world because world markets are watching this too that all of the deposits would be covered over and above the $250,000 FDIC max. They're trying to get ahead of people panicking and trying to assure people that we're not going to have another 2008 meltdown.I would pay attention to the news vs freaking out because freaking out only makes things worse. I'm listening to the experts because there are a ton of hot takes on social from people. Personally, what's important is to lean on representatives to amp up bank regulations that 45 gutted: https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp

Sierra166·Mar 10, 2023

UPDATE YC PRESIDENT GARRY TAN JUST NOW 1:32PM EST ON TWITTER"From what I hear, there are venture debt options coming from providers like Brex, but we're going to need *a lot* of options in order to avoid a mass shutdown of all American startups in the next few weeks."IT'S SERIOUS Y'ALLhttps://twitter.com/garrytan/status/1634256510682550275It looks like Peter Thiel was sort of pushing the bank run. YC told companies to take their money out. A lot of VCs were only thinking for themselves. At times like this, one is reminded that VCs are only interested in the most successful start ups and may view an event like this as a moment to pick the winners and let everyone else sink. It goes to show how unstable this is. And this makes the entire tech sector look worse and it makes it harder for liquidity ( M&A and IPOs ) to happen.It is not in their best interest to shore up the risk. They don't actually want most companies to succeed. They want their outliers to succeed and everyone else to fail. Some VCs were already pushing their fintech cos to take over market share. IMO it's not a good idea to keep cash in fintechs involved with start ups, like Brex for example. It's a bad time for Saas. But I agree with you. It's in everyone's best interest to maintain stability. But not to them. Especially investors involved in crypto.... they want the system to 'collapse'.

Filomena21·Mar 10, 2023

Peter Thiel only started telling his portcos to withdraw their funds yesterday once it was already clear that there were solvency issues. At that point, then yes it is the smart thing to do for Thiel and other investors to spread the word, even if it accelerates the run on the bank.44% of US startups bank with SVB (according to their own claims), and Thiel would have no guarantee that his "winners" would be able to move their money fast enough to not be impacted. My guess is that some of his portcos with good businesses may not have been nimble enough to quickly open a new bank account and transfer the money, and that has nothing to do with how well those companies/investments were performing. The finance person could have been on their Spring Break vacation during that 24-hour period.My point is SVB could have approached Thiel about investing prior to publicly announcing a capital raise that could fail. The public announcement of the capital raise under unusual circumstances drove the run on the bank.When I was referencing Brex, I was not saying that startups are holding any funds in Brex. I'm saying that Brex is the credit card most startups use, and many of those credit cards would be linked to SVB. If Brex is smart, they are now going to realize that a lot of their customers won't be able to pay down their credit card balance this month, so they'll probably also shut off the credit cards of startups who bank with SVB.Hindsight is 20/20 and maybe it will come out that Peter Thiel did have private conversations with SVB management in advance of the capital announcement raise. But right now it looks like they did NOT take that crucial step, leading Peter Thiel and all of his followers to get spooked and literally CAUSE the run on the bank.

Sierra166·Mar 10, 2023

Gary Tan is asking for a government bailout for the 30% of YC companies that do business with SVB. https://twitter.com/garrytan/status/1634286688922132481?s=20yes it's a mess but VCs should have stepped up or should step up. It's their ecosystem.

Filomena21·Mar 12, 2023

We're in agreement on that. If Peter Thiel truly started this merely because he was spooked by a $2bn capital raise being run by a well-respected investment bank, then that is reprehensible. I'm saying that if the run was already happening when he spread that directive, then he did nothing wrong.But if he just had a temper tantrum in response to something totally normal course, then it certainly does look like "cutting off his nose to spite his face."

Iynna·Mar 11, 2023

I am very concerned for the whole ecosystem... For those who bank at SVB and who will soon be concerned with slashing their burn again and not able to make payroll, I just hope there's a solution for those (eg goverments bailout or smth like that) For startups who didn't bank at SVB but that will be raising, what kind of environments does this leave them into? SVB has such a long history of backing at leat half of the tech ecosystem and having been good at doing so.. it's for sure sad times.I personally cannot speculate or predict the future, so time will tell us. There's definitely a systemic issue.

Filomena21·Mar 12, 2023

Yeah, I tend to agree with Bill Ackman's take: https://twitter.com/BillAckman/status/1634564398919368704People shouldn't have to be doing intense diligence on comparing banks before opening an account. Apart from comparing financial offerings like fees and interest rates, as well as non-financial factors like customer service or website UI, it shouldn't be up to consumers (even business owners) to evaluate whether a bank that's open for business is likely to become insolvent.

drashtishah·Mar 11, 2023

The companies are insured up to $250k.This is not the times for business. It is time for goodness. The government, VCs anyone who can, must step up to take charge. It is sad that uncontrollable macro-economic factors can be single point failures. Please reach out if you need to vent out or just want to talk.

Ali135·Mar 12, 2023

The FDIC will cover up to $250,000. It's a lesson to people and companies to diversify. I was happy to see this Tweet from Annie Tsai: https://twitter.com/meannie/status/1634408212324831232?s=20 If people and companies didn't do it before, they will now.I don't think this will be half as bad as the most recent recession as it hit multiple banks because of the housing market at the time. From what I've read, the other banks took a hit in trading, but they're okay. I hope that's true. The tech industry in contrast has been in shakedown mode for the last few months with layoffs hitting people left and right and trying to run leaner.It's TBD for everyone now. Most are hoping for word on a deal on Monday. I'm hoping for that too. I'm also seeing buzz that investors are ready to step up. I think there is going to be some blowback to the VCs that counseled companies to withdraw their money from SVB: https://www.businessinsider.com/silicon-valley-bank-general-catalyst-vc-firms-support-statement-2023-3At the company that I work for, we got a message from our CEO last evening letting us know that they were watching the situation before it culminated on Friday and that we're in a good place operations-wise. We do have funds in SVB, but our fiscal health is strong. Their fiscal health and profitability were big reasons I joined the company in the first place. I hope that the track record of strong fiscal health holds, and he's right.

Filomena21·Mar 12, 2023

There's some interesting replies to that tweet mentioning how female founders were less likely to be part of the same ecosystems steering them to open SVB accounts, so female-founded startups are less likely to be impacted.https://twitter.com/thegenevieved/status/1634586504113668096?s=20

Ali135·Mar 13, 2023

A good silver lining. I hope that's the case also with people of color as they probably had to go through different channels to get funding.

Echo131·Mar 15, 2023

I was indirectly affected because our payroll system was banked through SVB. And this all went down on a paycheck that we were supposed to also receive annual bonuses, of course. Thankfully, our payroll partner had already started a relationship with JPMorgan Chase, so Chase stepped in and covered payroll, and we eventually got paid yesterday. FDIC coverage of $250,000 is nothing when you think about a single company's payroll, even if they are a small business (which, we are not - 300+ folks, many of whom earn 6-figures, so that $250k gets zapped really quick). The ripple effect on this one... oof.

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