OK, what is going on with SVB?

March 12, 2023 ndowd

Welcome to Startups Weekly, a nuanced take on this week’s startup news and trends by Senior Reporter and Equity co-host Natasha Mascarenhas. To get this in your inbox, subscribe here.

Writer’s note: We’re breaking from our usual formatting this week because there was a once-in-a-generation collapse of one of the biggest banks in the country. Today’s space has been dedicated to our coverage on the matter, but we will be back to broader programming next week.

On Friday, I wrote about how Silicon Valley Bank has been closed by regulators, which are now in charge of the bank’s deposits. The bank is set to reopen Monday, which means we — and I mean that in the most collective sense — are in for a weekend of pause, fear and further questions. This is not a story of the week; it’s a story for the weeks and months ahead. As Y Combinator CEO Garry Tan put it, this could set startups and innovation back by 10 years.

After spending hours speaking to founders and venture capitalists about SVB, it’s clear that explaining the bank’s state of business or strengths will not necessarily stop the panic we’re seeing. It’s panic that is seeping into volatility at other banks; even the ones positioned to benefit from SVB’s bust just hours earlier.

The story is fast and ever changing, so I’m not going to toss you a half-baked take. What I know so far is despite rational analysis of actual business fundamental, SVB’s collapse is a human story. Here are the stories we’ve written about the crash so far, to be updated as the story develops:

How founders are reacting to Silicon Valley Bank’s crash

TechCrunch spoke to over a dozen founders about how the bank’s crash is impacting their business. In this piece, we highlight some of the stories, ranging from announcing fears that they can’t make payroll to putting together a timely discount code and blasting it out as a Hail Mary.

With SVB locked up, how are startups going to pay for stuff?

My colleague Alex Wilhelm asked one of the biggest questions out loud so founders don’t have to: How are startups going to pay for stuff if SVB is still locked up? In his TC+ analysis, he explains that entrepreneurs should be thinking about more than making payroll. How are they going to pay cloud vendors or process refunds? (I told you it’s a human story.)

What the flying heck happened to SVB?

Wilhelm also penned a needed recap on the timeline of events leading up to SVB’s collapse. Bullet points, we need more of them. In the piece, he asks: “Why did the bank go from saying it was well capitalized yesterday to what appears to be a fire sale so soon?”

For startup competition, SVB’s nightmare is a win and a dare

This piece seeks to dismantle the idea that SVB’s fall is a net positive for its competitors. Mary Ann Azevedo and I spoke to a few startups that are experiencing an influx in demand: Some are cautious; some are excited. The question remains: Will startups that have been screwed by a traditional bank now run the risk of turning to a private tech startup to hold their funds? Where do you go when you’re reminded of risk?

Venture firms are advising portfolio companies to move money out of SVB

For our third vantage point, let’s talk about venture capitalists. On Thursday, a number of VC firms — including but not limited to USV, Founders Fund, Hustle Fund, Inspired Capital and Valor Equity — advised startups to pull money out of SVB. Some advised diversification.

VCs are declaring their allegiances in the wake of SVB’s collapse

TC’s Kirsten Korosec and Mary Ann Azevedo report that “the dust has yet to settle in the largest bank run in U.S. history, a collapse that in just 48 hours dismantled the tech startup-focused Silicon Valley Bank.”

“But already a debate is raging in the venture capital community and investors are picking sides. On Friday, a group of more than two dozen venture capital firms issued a joint statement that supports Silicon Valley Bank. The statement was notably after — and not before — Federal Deposit Insurance Corporation regulators closed the bank and took control.

And the posthumous show of support keeps growing. By midday Saturday, more than 100 venture firms had added their names to the joint statement. There are also some noticeable absences on the list, including a16z, Founders Fund, Sequoia Capital and Y Combinator,” the story reads.

Y Combinator calls on Congress to act on SVB collapse

Serial entrepreneur and venture capitalist Garry Tan is less than three months into his new job as the CEO of Y Combinator, one of the most famed accelerator programs in tech. And it seems like it’s been an eventful onboarding process thus far. Along with pretty much every other corner of the startup world, YC was also affected by Silicon Valley Bank’s collapse: 30% of companies are exposed through SVB and are at risk of not being able to make payroll, he tweeted Saturday. He has spun up a petition, with over 1,000 signatures and counting, to call on congress to take swift action.

Brex CEO is trying to raise over $1 billion in a weekend for SVB-related bridge loans

Brex CEO Henrique Dubugras is currently working to raise over a billion dollars in a weekend to help fund an emergency bridge credit line that he believes will help startup customers impacted by Silicon Valley Bank’s collapse be able to make payroll next week. Dubugras declined to comment on how much capital has been committed for the credit line thus far, but said he’s on back to back calls trying to get funds locked down.

Regulators are requesting SVB employees to stay on for the next 45 days

Founders and venture capitalists aren’t the only ones experiencing volatility right now: Silicon Valley Bank employees are seeing their jobs in flux as their employer falls apart. SVB, which was closed down yesterday, is now being run by regulators. And while employees are no longer employed by the bank, they got an e-mail from “the office of the CEO” saying that they have jobs for the next 45 days at 1.5x their current salary.

What does the collapse of SVB mean for venture debt?

TC’s Rebecca Szkutak writes about how the bank’s collapse could affect the increasingly hot venture debt market. She reports that “not all players will be pulling back, and nonbanking lenders — many of whom are flush with cash — are in a great position to capitalize on the gap SVB leaves. Private lenders that have traditionally focused on venture debt, including Hercules, Western Technology Investment and Runway Growth Capital, may see a flurry of opportunity.”

If you want more, we certainly have words for you, including notes on halted trading, a recap on how this happened so fast and “collywobbles” elsewhere.

As always, you can follow me on Twitter or Instagram to continue the conversation. Those with information on SVB and its fall out, whether you are an employee, founder and venture capitalist can send me tips at natasha.m@techcrunch.com or on Signal at +1 925 271 0912. My Twitter DMs are also open.