The collapse of Silicon Valley Bank today sparked fears of contagion in the tech industry with mass layoffs predicted by experts if start-ups fail to make payroll.
The Federal Deposit Insurance Corporation (FDIC) seized SVB’s assets today after depositors, mostly tech workers and start-ups, triggered a bank run following the shocking announcement of a loss. of $1.8 billion.
With around $209 billion in assets, SVB is the second largest bank failure in US history after the collapse of Washington Mutual in 2008. The collapse could decimate the tech sector as many startups use SVB as your sole account and creditor.
Investors are only insured up to $250,000, and like tech companies, many Silicon Valley workers use the bank for their personal cash flow and mortgages.
New York businessman Brad Hargreaves warned that the failure of SVB would have a “massive impact on the tech ecosystem.”
Santa Clara police officers leave the Silicon Valley Bank headquarters in Santa Clara, California, on Friday. The Federal Deposit Insurance Corporation (FDIC) seized SVB’s assets today after depositors, mostly tech workers and start-ups, triggered a bank run following the shocking announcement of a loss. of $1.8 billion.
Two police cars arrived at the Park Avenue bank branch today after investors frantically arrived trying to get their money out.
Ashley Tyrner, chief executive of Boston wellness firm FarmboxRx, said she had at least $10 million on deposit with SVB and has been desperately calling her banker. She called it ‘the worst 18 hours of my life’
‘SVB was not just a dominant technology player, but highly integrated in some non-traditional ways. We will see some things in the next days or weeks, ”he tweeted.
‘One, SVB became incredibly integrated into the lives of many founders. Not only the bank and lender of his start-up, but also provided personal mortgages and other financial services. Quite a hassle for the FDIC (or eventual buyer) to relax.
‘Two, the ‘uninsured’ balances in SVB, those above $250K, are in jeopardy. The FDIC plans to pay them ‘while selling SVB’s assets’. Many new companies banked exclusively with SVB as *this was a debt covenant*!’
Hargreaves said many chief executives faced a difficult decision yesterday, either withdraw their cash and default on their debt or risk losing everything if the bank fails.
‘Many chose to stand their ground as the complete failure of SVB seemed far-fetched. Now they may not be able to make payroll next week,’ he said. ‘Unpaid wages pierce the corporate veil, so boards are *incredibly* sensitive to hiring workers they may not be able to pay. Expect mass layoffs later today, no later than Monday.
Michael Burry, the investor featured in 2015’s The Big Short, warned: “We may find our Enron today.”
The FDIC said Friday that customers would have full access to their insured deposits no later than Monday morning.
The federal agency said it will pay uninsured depositors an anticipated dividend within the next week. As the FDIC sells off the bank’s assets, future dividend payments may be made for the uninsured funds.
However, the FDIC said that, at the time of the bank’s closure, the amount of deposits that exceeded insurance limits had not been determined.
“This is going to be tough for a lot of founders and startups, a lesson to be learned,” said Adrian Mendoza, founder and general partner at Mendoza Ventures in Boston.
He told The Boston Globe: ‘I get texts and emails from everywhere. They are bombing us.
A Brinks security truck is parked outside the Silicon Valley Bank in Santa Clara as investors line up outside after the bank closed its doors. The Federal Deposit Insurance Corporation (FDIC) seized SVB’s assets today as depositors, mostly tech workers and start-ups, began withdrawing their money following the shock announcement of a loss of $1.8 billion.
The Federal Deposit Insurance Corporation seized SVB’s assets today when trading was halted after its shares plunged 66 percent before trading.
Ashley Tyrner, chief executive of Boston wellness firm FarmboxRx, said she had at least $10 million on deposit with SVB and has been desperately calling her banker. She said it had been “the worst 18 hours of my life.”
“It was pure and utter panic,” he said of his mindset after hearing the news.
Tyrner, who runs a 63-employee company, told The New York Post that “panic broke out” Thursday morning when top executives called her to say they urgently needed her to approve a wire transfer. “When I went to log in to approve the transfer, the system completely crashed,” Tyrner said. She wouldn’t let anyone in.
Tyrner said he had repeatedly tried to call customer service and his personal banker at SVB. “He wasn’t answering the phone,” Tyrner told the Post. ‘He texted us that he’s so sorry. They are trying to fix the problem so we can log into the account.
But when she tried to contact him later when the problem was still not fixed, he stopped responding. “He won’t answer to anyone at my company,” she said. Not even a text. We have no idea what’s going on.