Silicon Valley Bank failure comes amid 'challenging' time for startups While most banking experts do not expect the fallout from Silicon Valley Bank's collapse to spread to other parts of the financial world, how much money depositors will be able to recoup remains an open question. "This can be an existential risk to competition and innovation in the American economy for the next decade." Will they have to take out personal loans to keep the business running? Do they have to furlough workers?" Tan said. "Founders are texting me now and saying they don't know how to make payroll next week. ![]() Startup leaders have been reaching out to him nonstop since Silicon Valley Bank failed with a sense of dread and fear - and increasingly confronting what could be inevitable layoffs, or even the end of their companies. Tan, with Y Combinator, which helped launch startups including Airbnb, Reddit and Instacart, said the biggest threat right now is not to the Rokus of the world, but rather to the scrappy startups that were already fighting to stay alive amid a challenging fundraising environment. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB," officials at Roku wrote of what amounts to about 26% of the company's cash. Roku, the TV streaming provider, was among the companies caught in the middle to the tune of $487 million, it said in a regulator filing on Friday. Silicon Valley Bank did business with well-known tech companies including Shopify, Pinterest, Fitbit and thousands of lesser-known startups, in addition to established venture capital firms, like Andreessen Horowitz. "It's these services that startups couldn't get elsewhere." "If you're a high-growth startup, you can't get a credit card from a normal credit card provider, you can't get a loan from a big bank, but Silicon Valley Bank would give you that," Shelf Engine's Kalb said. tech startups backed by venture capitalists. Eventually, Silicon Valley Bank would come to do business with nearly half of all U.S. ![]() An 'existential risk' to innovation and competition in Americaįounded over a poker game in 1983, Silicon Valley Bank became the go-to lender for tech startups that appeared too risky in the eyes of larger, more traditional banks. While critics consider the idea of the government rescuing the bank a bailout for the tech and venture capital world, Tan argues that such a move would save depositors, many of which are small businesses in the tech sector. "If the government doesn't step in, I think a whole generation of startups will be wiped off the planet," Garry Tan, president and CEO of the startup incubator Y Combinator, said in an interview. It is a nail-biting limbo state that many tech startups deeply entrenched in Silicon Valley Bank are now facing in the wake of the bank's implosion, the largest American bank failure since the 2008 financial crisis.įor tech startups, which for decades have relied heavily on the bank based in Santa Clara, Calif., it has set off a crisis that could lead to mass layoffs, or hundreds of startups collapsing, according to industry insiders.
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