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Startups Tied To Silicon Valley Bank Crisis Are Fearing The Worst As Monday Looms

Published 12/03/2023, 18:09
Updated 12/03/2023, 19:10
© Reuters.  Startups Tied To Silicon Valley Bank Crisis Are Fearing The Worst As Monday Looms

Benzinga - Although the Federal Deposit Insurance Corporation (FDIC) will sell Silicon Valley Bank's assets and make a portion of its clients' uninsured deposits available as soon as Monday, startups remain uneasy about their future and are hoping that a buyer for the bank emerges before then.

SVB has supported nearly half of U.S. venture-backed startups, according to the bank. And because significant funds are currently locked up, many startups are concerned about making payroll in the coming days.

Nikita Bier, who founded the social media app Gas, for instance, went on Twitter on Friday to share his distress.

In an interview with The Wall Street Journal, Tan further revealed that a survey of Y Combinator's approximately 3,000 active companies found that nearly 400 had a relationship with SVB and were exposed. Over 100 of those companies said they worried they wouldn't make payroll over the next 30 days without a quick resolution to the SVB situation.

Read Also: Larry Summers Says Consequences 'Severe' If Silicon Valley Bank Crisis Isn't Properly Resolved

Some startups indirectly linked with SVB have been also hit by its collapse.

Healthtech startup Flow Health, for example, uses payroll provider Rippling, which has ties to SVB. "We literally have no way of paying employees right now," Flow Health CEO Alex Meshkin told Insider.

Toy store Camp similarly said it is distressed because its funds with SVB are locked.

"All of our cash was at SVB, and we are trying to build up our balance at Chase," Camp CEO and co-founder Ben Kaufman told Insider.

If SVB does not fetch a buyer, the FDIC may need to liquidate the bank and sell its assets to make depositors, like Camp, whole again.

"The FDIC will love to have the bank bought off their hands, and I am sure they will work furiously over the weekend to arrange a shotgun marriage," Sandeep Dahiya, associate professor of finance at Georgetown University's McDonough School of Business, told Insider.

SVB, a subsidiary of SVB Financial Group (NASDAQ: SIVB), was shut down by the California Department of Financial Protection and Innovation last Friday.

Read Next: SVB's Collapse Rooted In Treasury Bets During Pandemic: 'Once It Started, There Was No Stopping It'

Photo: Shutterstock

© 2023 Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

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