What was previously a point of pride on Silicon Valley Bank’s website now reads like a warning sign: nearly half of U.S. venture-backed technology and life sciences companies bank with the financial institution.
Financial regulators on Friday morning shut down Silicon Valley Bank and put it in the hands of the FDIC, a jaw-dropping move that has created a crisis for many startup leaders and their financial backers.
Based in Santa Clara, Calif., Silicon Valley Bank has long been a key player in the Seattle region. GeekWire’s reporting suggests that the percentage of tech startups in the area that used Silicon Valley Bank was even higher than the national average: upwards of 80% or more of the venture-backed companies in the region.
Against a backdrop of rising interest rates and scarce investment capital, Silicon Valley Bank’s shares plummeted this week after the firm said it would book a $1.8 billion loss related to securities sales.
Some firms advised founders to look for alternative banking options.
In an order Friday taking possession of the bank, California financial regulators said investors and depositors withdrew $42 billion in deposits on Thursday, leaving it with a negative cash balance of $958 million.
GeekWire co-founder John Cook, who started covering startups and venture capital before the dot-com bust, and continued through the Great Recession and beyond, calls this an “absolute meltdown,” the likes of which he hasn’t seen before on the startup beat. Industry veterans he’s been talking with offer similar assessments.
On this special episode of the GeekWire Podcast, we talk about what caused the situation, what it says about the state of the tech economy, and what could be next for startups, investors, and others impacted by the shutdown.
Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.