Friday’s collapse of Silicon Valley Bank — the 16th-largest bank in the nation — has left tech companies scrambling for answers ahead of business on Monday, including many Utah-based startups.
Kat Kennedy serves as a general partner at Kickstart, a Utah-based venture capital firm that invests in companies during the pre-seed and seed stages. She said Kickstart has been monitoring the SVB situation since Thursday, since they have had a long-standing relationship with the bank.
“Companies in our portfolio have banked with them,” Kennedy said. “So when I say we have a relationship with them, it’s that Silicon Valley Bank worked hand-in-hand with the venture and ... innovation ecosystem here in Utah.”
About 50% of U.S. venture-backed startups banked with Silicon Valley, according to its website. Kennedy said that figure likely extends to Utah’s venture-backed companies banked as well, since SVB was often one of the earliest lenders and an “incredible partner” for new companies.
The bank had a branch to serve Utah companies in Cottonwood Heights.
After the news about SVB circulated on Friday, Utah Governor Spencer Cox tweeted, “We recognize the serious impact this has on many Utah firms with significant assets at risk. We will push regulators and federal partners to work quickly for stability, certainty and solutions.
The impact of SVB’s failure won’t just be limited to the venture-capital sector, Kennedy said.
“In America, we should be able to have faith in our banking system. Depositors should be made whole, and that is part of the contract that we make with the banking system here in the United States,” Kennedy said.
“So should everyone be concerned if a bank does not honor that relationship with depositors? I think that is of grave concern to everyone,” she continued. “That’s a $200 billion bank... I think people will be impacted, even if they aren’t one of those employees who is unsure of what’s going to happen with their paycheck come next week.”
Since the bank was seized by the Federal Deposit Insurance Corporation Friday morning, Kickstart employees have been on the phone talking with founders of companies. These companies’ biggest concern is making payroll on Monday.
“There’s a lot of misconceptions around who is going to be hurt if we can’t get deposits back — and who’s going to be hurt or employees,” Kennedy said. “These are not rich, wealthy people that are going to be hurt through what happened to Silicon Valley Bank. The people who are hurt are the depositors.”
According to The Associated Press, Silicon Valley Bank had $209 billion in total assets at the time of its failure. It was unclear how many of its deposits were above the $250,000 insurance limit — which depositors expect to receive on Monday — but previous regulatory reports showed that many accounts exceeded that amount.
However, that $250,000 insured by the FDIC is “not enough,” Kennedy said, so companies are trying to figure out how to bridge the gap for their payrolls until they are able to get their total deposits out. She hopes that the bank’s failure won’t lead to the failure of companies who banked with SVB.
“A lot of times [startups have] a young, unproven founder chasing an opportunity that hasn’t yet been proven — it is innovative, it is new,” Kennedy said. “Silicon Valley Bank took on that risk, actively worked alongside and counseled those founders, and that is something that is going to be very, very hard to replace. ... So long term, we are going to have a vacuum to be filled when it comes to venture lending.”