Founders and investors say the bank opened doors—and offered perks—no other bank would. Now companies may face a funding gap. Founders and investors say the bank opened doors—and offered perks—no other bank would. Now companies may face a funding gap. Business Latest
WHEN REAL-ESTATE-STARTUP COFOUNDER Vai Gupta visited downtown San Francisco from the suburbs last year, he borrowed a conference room at a branch of Silicon Valley Bank to host a quick business meeting, just like he has several times over the past decade. Gupta also has leaned on the bank for networking events, financial tutorials, and discount codes for business software and services. Other banks offer competing perks, but SVB’s total package had won Gupta’s loyalty until the tech-focused financial giant cratered last week.
Now Gupta is among thousands of customers wondering whether they will ever again find a financial institution that offers the unique blend of benefits, savvy, and speed that SVB delivered to entrepreneurs. Founded about 40 years ago by a Stanford University professor who teamed with banking experts after noticing students struggling to fund business ideas, Silicon Valley Bank treated startup founders like royalty long before their companies ever generated a profit or even raised significant funding.
By offering loans, guidance, bountiful bottles of fine wine, and all-expenses-paid ski trips to companies too small in sales for bigger banks to handhold, SVB quickly became the go-to bank for anyone intersecting with the San Francisco Bay Area’s globally known startup community. Clients who have grown with SVB’s help include Cisco, Coinbase, and Etsy.
But a bad bet on interest rates staying low—they have risen sharply since the start of 2022—and poor crisis communications led to its customers launching a run on the bank over fears about SVB’s financial health. Regulators took control of the bank on March 10, and the US Federal Deposit Insurance Corporation stepped in over the weekend to fully guarantee the remaining deposits.
SVB’s future remains uncertain, and several entrepreneurs say they are finding that financial institutions rushing to fill the void are falling short in matching its suite of services and extras. Most of all, they wonder what it might mean for them and startups more broadly to lose a trusted partner that helped early-stage companies and founders survive difficult times and secure mortgages or loans others wouldn’t provide.
“They understand our innovation ecosystem and build all of their offerings around that,” says Hemant Taneja, the chief executive and managing director of General Catalyst, a venture capital firm that banks with SVB. “They have the trust of the VC community that they will help these companies through thick and thin.”
Leave a Reply