As the public learns more about how the demise of Silicon Valley Bank (SVB) will affect the tech and startup world, fear of a bad 2008 reboot offers an easy narrative. But it’s not that simple.
ICYMI, here’s a recap of all things SVB, with whom much of the tech and startup world banked: Last Wednesday, the bank announced plans to sell $1.75 billion in stock shares and raise capital, causing panic among founders and investors. SVB’s stock took a tumble, and investors were advising founders to move money out of the bank.
Now, the bank is closed and under the control of the Federal Deposit Insurance Corporation (FDIC), which began an auction of the bank’s assets this weekend. All depositors who only had up to $250,000 — what’s insured by the FDIC — could access their funds as of this morning, and the FDIC will be paying an advance to everyone else in the next week. Those folks will also be getting their money back in full. At the end of last year, SVB controlled $209 billion in assets and $175.4 billion in deposits.
But for the founders who banked with one of the former top players of the game, the news is highly personal. Cameron Hardesty, the CEO and founder of DC-based floral tech startup Poppy, said she first heard the news from a tweet someone had shared in the law firm Cooley’s Mindshare group. Having graduated from school right before the Lehman Brothers collapse, she said she immediately felt like something was off.
“My Spidey Sense went off and I felt like: Something is wrong here,” Hardesty told Technical.ly. “Some of my husband’s friends from college are in finance and they basically were like, ‘Yeah, something weird is happening.’ And then within about an hour, we had moved our money out.”
Poppy was able to pull its money out in time, Hardesty said. Over the weekend, leadership wired money to the company’s Gusto account, which had been connected to SVB; they’re now at work setting up accounts with some of the major banks. But the rush to understand everything and make a move appeared a lot like the PPP loan days, she noted, and she felt “like a bullet whizzed by my head.”
A Maryland-based startup employee who spoke to Technical.ly under the condition of anonymity said they first heard about SVB’s problems on the news Wednesday morning, right after the bank put out its investor deck. At the time, they felt like no one really understood how bad the situation was, and their company opted to wait and see what happened instead of pulling money out right away. Now, it’s in the process of moving accounts to a different bank and figuring out what to do with debt.
Right now, this responded does sense a lot of negative sentiment around SVB, though they think it’s partially due to the difficulty of understanding the full extent of what happened — and the impact it will have. But for founders and startups, they’re predicting investors and higher-ups will take a much closer look at finances going forward.
“Investors and board members will probably be looking at the startups as: How are you managing your treasury?” they said. “Do you have cash in multiple different places? Are you being really conservative and running your company more like a traditional brick-and-mortar company?”
Not everyone shares this negativity against SVB. Though his startup does not have an account with the bank, Naeim Khanjani, founder of DC-based Electo Analytics, noted that SVB has had a strong and positive impact on the local startup scene.
“One thing I know as a business founder and entrepreneur is how much I have seen SVB contribute to the success of early-stage founders,” Khanjani wrote in an email to Technical.ly. “I have seen firsthand SVB’s commitment to building a strong and inclusive startup ecosystem, at least in the greater Washington, DC area, led by [Silicon Valley Bank VP] Joey Clark in bringing together diverse founders and finding a space for thoughts and learnings to be exchanged.”
Despite the setback, Hardesty said Poppy is still on track to double revenue from last year, as well as working on some new tech features to launch this spring. But for the tech and entrepreneurial scene as a whole, she anticipated things remaining a bit tight. This recent news, she said, feels like a crescendo of last year’s reversal among the VC industry of growth at all costs, and she expects more difficulties for founders trying to raise money.
But companies that have been able to keep their heads afloat through all of the turmoil since 2020, she noted, will appeal to investors even more.
“I’m super proud of what we’ve been able to overcome,” she said.”This just feels like hit after hit, and if we can survive what we’ve already survived, we can pretty much survive anything.”
The unnamed Maryland source observed that while the impact of the SVB news will be great, they don’t feel like it’s on the scale of other collapses. Companies will move forward and tech will go on.
“This is not going to be the end of tech, entrepreneurship will still happen,” they said. “It might not be as with SVB, it might be with a different bank, but if you think that this bank failing will ruin tech for the rest of eternity, then I would have to disagree with you.”
Knowledge is power!
Subscribe for free today and stay up to date with news and tips you need to grow your career and connect with our vibrant tech community.