How tech CEOs and other Silicon Valley bank financiers struggled to stay afloat


The tech community is still reeling from the abrupt collapse of Silicon Valley Bank, the industry’s one-time financial powerhouse, which burst into flames last Friday in the second largest bank collapse in US history.

Small businesses and start-ups with deposits in the SVB will soon have access to all their money, regulators said after contingency measures were put in place to cover any funds in excess of the $250,000 per depositor limit promised by the federal government.

But on Monday afternoon, business owner Vanessa Pham said she was still waiting to gain access to cash locked up at the bank.

“It’s very demoralizing to think about because when these kinds of shifts and collapses happen in huge institutions, it’s often the little guys like us who feel it the hardest,” said Pham, co-founder of Omsom, an Asia-based food company in NYC.

For business owners who formed the bedrock of SVB’s business, the past few days have forced a series of impromptu measures to keep the lights on – and raised new questions about corporate banking decisions that few entrepreneurs ever thought would they would have to keep doing this.

Though SVB is known for serving larger tech companies like e-commerce platform Shopify and software company CrowdStrike, it has carved a niche for itself among small and fledgling businesses. As a string of Silicon Valley garage projects blossomed into multi-billion dollar Goliaths, SVB established itself as the region’s favorite commercial banker.

But the tech sector hit a wall last year as rising interest rates and worries about a slowing economy prompted many of the industry giants to scale back much of their pandemic-era hiring. When federal regulators closed Silicon Valley Bank — the country’s 16th largest lender — on Friday, few immediate lifelines were available to some of its customers.

Camp, a family-focused retail and entertainment startup, turned to its customers for help.

The 200-person company, which operates physical locations resembling old-school grocery stores that also contain black-box theater spaces, has launched a sweeping discount offer to get cash, according to founder and CEO Ben Kaufman.

That was plan B, though.

Plan A, Kaufman said, was a mess late last week “to transfer the money from Silicon Valley Bank to Chase Bank,” where the company had a small account, but “we saw our transfer on Thursday never came out.” “. he said.

So Camp turned around and launched a 40% off promotion — checkout code: “BANKRUN” — and urged customers to “probably buy more than they need right now” to prop up the company’s cash flow, Kaufman said , who estimated this value at about 85%. von Camp’s money was tied up with the SVB.

“We panicked,” he recalled on Monday. “We didn’t know how to make ends meet in the coming weeks. And luckily, we reached out to our customers and they came out in droves. It was really amazing to see.”

Slumberkins, a toy company based in Vancouver, Wa., had a similar idea when faced with the same predicament.

Co-founders Callie Christensen and Kelly Oriard were on a plane leaving a New York toy conference when they realized their attempt to transfer the contents of their SVB account to a new account had failed.

“We landed in Portland and at that moment we were kind of like, ‘Oh, wow, I don’t know if we’re going to be able to do payroll in two weeks,'” Christensen said of the company’s 30 employees.

Slumberkins reached out to his fan base of parents and educators on social media, telling his 281,000 Instagram followers on Friday that the company had been swept into bank fallout — and, like Camp, reduced its entire website by 40% have.

Within 24 hours, the founders said, they had generated enough buffers to slow the free fall of the company’s revenue. The site has been visited more than 170,000 times, 10 times the traffic they had when they appeared on ABC’s Shark Tank in 2017, they said.

However, as of Monday afternoon, they still cannot access their funds.

“We’re still in this limbo,” Christensen said.

Not all of Silicon Valley Bank’s clients were tech companies and startups.

In 2021, SVB bought Boston Private Bank and Trust, where the Children’s Medical Office of North Andover in Massachusetts had banked for about a decade, according to pediatrician Daniel Summers, who serves as the practice’s finance director. At first, Summer said he didn’t think much of the purchase.

But having frozen hundreds of thousands of dollars in recent days — he regained access late Monday morning — was sobering, Summers said.

“I’ve gotten a pretty good handle on how to manage a small business’ finances,” he said, “but it’s not at all like managing the banking industry as a whole or tech finance. I don’t waste my time on it.”

“If I decide to go with another bank in the future, I’ll actually ask about their portfolio,” Summers said. “Now that’s a question I’ll have on my radar.”

Camp’s Kaufman also said the SVB failure was an unwelcome crash course in a sector he didn’t have to actively attend to.

“Camp, like many startups, has been raising equity, and with stock markets now being even more disrupted by a possible looming bank failure, that’s worrying for companies like ours,” he said.

The other lesson, Kaufman said, is that while “venture capital is generally important if you want to do ambitious things, … clients are the best source of long-term capital.”

Some tech insiders said they were relatively unfazed by the meltdown.

Philip Rosedale, the creator of the Metaverse precursor Second Life, said Monday, “I didn’t have to decide what to do as a founder yesterday” because his company High Fidelity — which he said also has deposits that make the $250,000 far exceeds FDIC insurance limit – didn’t bank with SVB, “but I’m absolutely certain what I would have done, which is nothing.”

“I think the coming days will show that banks or banking in general is fine at the moment,” he said.

As the SVB fell apart on Friday, Matt Gunnin, the founder and CEO of esports data and analytics provider Esports One, said he didn’t want to withdraw his company’s money. Even after learning that federal regulators had shut down the lender with no guarantee he would get all his money back, Gunnin said SVB was the best bank he had ever worked with.

“In my opinion, without a bank like SVB, there wouldn’t be as many start-ups in technology,” said Gunnin. He praised the federal intervention, saying, “The negative impact this would have had across the country would have been so disastrous that it was unimaginable that startups would not be fully made.”

Nonetheless, when Gunnin reached out to him again on Monday, he said he had decided to withdraw his money – joining a recent market-shattering trend of depositors pulling out of mid-sized and regional banks.

Shortly after regaining access to his SVB funds, he began transferring funds from Esports One to an account with Chase.

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