Silicon Valley Bank: Startups report relief after plan – 03/12/2023 – Market

A wave of relief washed over Silicon Valley on Sunday after a tense weekend of board meetings, emergency funding plans and pleas for help after regulators stepped in to support the region’s namesake bank.

Banking regulators said late on Sunday that customers of Silicon Valley Bank (SVB), which closed on Friday, would have access to their funds on Monday, allaying fears that startups would struggle to pay your employees this week. The bank’s closure followed interest rate hikes that hurt its first-time clients and a failed capital increase attempt that spurred deposit withdrawals.

Despite the palpable relief, questions remain about the funding environment for startups, which have come to rely on Silicon Valley Bank’s backing for unproven deals that larger banks shy away from. And the bank still hadn’t found a buyer as of Sunday, which was the hope of many venture capital firms and tech founders eager for positive news.

“This is a big step towards restoring confidence in the startup community. Prior to this move, many startups were planning emergency measures that would likely lead to more layoffs and furloughed employees. The actions [do governo] provided much-needed certainty that everyone can make payroll on Monday,” said Jon Sakoda, founder of early-stage venture firm Decibel Partners.

The bank’s sudden shutdown sent chills through Silicon Valley amid a bleak period marked by tech layoffs and a slump in spending as consumers closed their wallets. Company executives, many of whom have stashed all their funds in Silicon Valley Bank, took to Twitter and other social media to plead for relief.

Sam Altman, who runs OpenAI, known for its ChatGPT artificial intelligence software, was among those who answered the call, offering emergency funding to startups to help weather the uncertainty and pay their employees, Reuters reported on Sunday.

A joint statement by US government agencies, including the Treasury Department and the Federal Reserve, indicated that taxpayers would not bear any costs associated with the new plans surrounding Silicon Valley Bank. However, shareholders and some unsecured creditors will not receive the same protections.

Tech investor Asheesh Birla predicts that in the coming days, startups will rush in droves to open accounts at major banks. And for companies that have sizable cash holdings, he thinks there will be a surge of interest in hiring treasurers who will work to minimize the amount of cash companies are holding at any given time.

Silicon Valley Bank has so far been a reliable source of funding for startups compared to other banks.

Doktor Gurson, CEO of Rad AI, said the news represents a “collective sigh of relief” after days of worrying about the payroll at his startup, which has around 65 employees. “I lost a few years of my life over the weekend, to be honest. It’s been a bit of a roller coaster ride.”

Still, the saga is far from over. Even if Rad AI plans to move money into new accounts at larger banks, it’s still unclear exactly when it will be able to access all of its SVB funds, he said.

“I don’t know if there’s anywhere safe to go,” he said. “I’m still a little nervous about what might happen.”

He added: “We will still need to assess what we are doing in the future.”