‘Concern and Panic’: Startups Respond to SVB Collapse

From winemakers in California to start-ups across the Atlantic, companies are fighting to bring down Silicon Valley Bank.

NEW YORK. It was called the Silicon Valley Bank, but its collapse sent shock waves around the world.

From winemakers in California to startups across the Atlantic, companies are struggling to figure out how to manage their finances after their bank suddenly closed on Friday. The crisis means disaster not only for businesses, but for all their employees, whose salaries may be associated with chaos.

California Gov. Gavin Newsom said on Saturday he was in talks with the White House to help “stabilize the situation as quickly as possible, protect jobs, people’s livelihoods and the entire innovation ecosystem that has powered our economy.”

US customers with less than $250,000 in the bank can qualify for insurance provided by the Federal Deposit Insurance Corporation. Regulators are trying to find a buyer for the bank in the hope that customers with more than that amount can bail out.

This includes clients such as Circle, a major player in the cryptocurrency industry. He said he has about $3.3 billion out of approximately $40 billion in reserves for its USDC coin on SVB. This caused the value of USD Coin, which is trying to hold on to the $1 level, to briefly drop below 87 cents on Saturday. It later rose above 97 cents again, according to CoinDesk.

Across the Atlantic, start-ups woke up on Saturday to find that SVB’s UK business would stop making payments or accepting deposits. The Bank of England said late on Friday that it would take Silicon Valley Bank UK into bankruptcy proceedings, which would pay eligible savers up to £170,000 ($204,544) in joint accounts “as quickly as possible”.

“We know there are a large number of startups and investors in the ecosystem that have a significant impact on SVB UK and will be very concerned,” Dom Hallas, chief executive of Coadec, representing UK startups, said on Twitter. He cited “anxiety and panic”.

The Bank of England said the assets of SVB UK would be sold to pay back creditors.

It’s not just startups that are in pain. The collapse of the bank affected another important industry in California: the production of fine wines. He has been a powerful vineyard lender since the 1990s.

“This is a huge disappointment,” said winemaker Jasmine Hirsch, general manager of Hirsch Vineyards in Sonoma County, California.

Hirsch said she expects her business to be fine. But she worries about the wider implications for small winemakers seeking lines of credit to plant new vines.

“They really understand the wine business,” Hirsch said. “The disappearance of this bank, as one of the most important creditors, will certainly have an impact on the wine industry, especially in an environment where interest rates have risen.”

In Seattle, Shelf Engine CEO Stefan Kalb found himself immersed in emergency meetings figuring out how to pay wages instead of focusing on his startup’s business helping grocers manage their food orders.

“It was a tough day. We have literally every penny in Silicon Valley Bank,” Kalb said on Friday, estimating the amount of the deposit, which is now pegged to millions of dollars.

He’s suing for a $250,000 limit, but that won’t be enough to pay 40 Shelf Engine employees for long. This may force him to make a decision about whether or not to lay off employees until the mess is cleared up.

“I just hope the bank gets sold over the weekend,” Kalb said.

Tara Fung, co-founder and CEO of tech startup Co:Create, which helps launch digital loyalty and rewards programs, said her firm uses multiple banks besides Silicon Valley Bank, so she was able to move her payrolls and vendor payments to another on Friday. bank.

Fung said her firm chose the bank as a partner because it is “the gold standard for technology firms and banking partnerships.”

San Francisco-based employee performance management company Confirm.com was among Silicon Valley bank depositors who rushed to withdraw their money before regulators seized the bank.

Co-founder David Murray refers to an email from one of Confirm’s venture capitalists urging the company to withdraw its funds “immediately”, citing signs of a bank run. Such actions hastened the flight of cash, which led to the collapse of the bank.

“I think a lot of the founders shared the logic that, you know, there’s nothing wrong with pulling money to be safe,” Murray said. “So we all did it, hence the bank run.”

The US government must act faster to stop further damage, said Martin Warsawski, an Argentine entrepreneur who invests in the tech industry and Silicon Valley.

One of his companies, Overture Life, which employs about 50 people, has about $1.5 million in deposits at a bank in financial difficulty but can rely on other assets elsewhere to pay wages.

But other companies hold large percentages of their cash in Silicon Valley Bank and need access to more than the amount protected by the FDIC.

“If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine,” Varshavsky said on Saturday. in which so many companies will not be able to pay wages.”

Andrew Alexander, a math teacher at a San Francisco private high school that uses Silicon Valley Bank, wasn’t too worried. His next paycheck is scheduled for two weeks at the earliest, and he is confident that many problems will have been resolved by then.

But he worries about friends whose livelihoods are more closely tied to the tech industry and Silicon Valley.

“I have a lot of friends in the startup world who are just scared,” Alexander said, “and I really sympathize with them. It’s pretty scary for them.”

AP contributors Matt O’Brien, Michael Liedtke, and Alex Veiga contributed.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button