The sudden collapse of Silicon Valley Bank has thousands of tech startups wondering what happens now to their millions of dollars in deposits, money market investments and outstanding loans.
Most importantly, they're trying to figure how to pay their employees.
"The number one question is, 'How do you make payroll in the next couple days,'" said Ryan Gilbert, founder of venture firm Launchpad Capital. "No one has the answer."
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However, unlike a typical brick-and-mortar bank — Chase, Bank of America or Wells Fargo — SVB is designed to serve businesses, with over half its loans to venture funds and private equity firms and 9% to early and growth-stage companies. Clients that turn to SVB for loans also tend to store their deposits with the bank.
The Federal Deposit Insurance Corporation, which became the receiver of SVB, insures $250,000 of deposits per client. Because SVB serves mostly businesses, those limits don't mean much. As of December, roughly 95% of SVB's deposits were uninsured, according to filings with the SEC.
But the process is much more convoluted for uninsured depositors. They'll receive a dividend within a week covering an undetermined amount of their money and a "receivership certificate for the remaining amount of their uninsured funds."
"As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors," the regulator said. Typically, the FDIC would put the assets and liabilities in the hands of another bank, but in this case it created a separate institution, the Deposit Insurance National Bank of Santa Clara (DINB), to take care of insured deposits.
Clients with uninsured funds — anything over $250,000 — don't know what to do. Gilbert said he's advising portfolio companies individually, instead of sending out a mass email, because every situation is different. He said the universal concern is meeting payroll for March 15.
Gilbert is also a limited partner in over 50 venture funds. On Thursday, he received several messages from firms regarding capital calls, or the money that investors in the funds send in as transactions take place.
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One founder, who asked to remain anonymous, told CNBC that everyone is scrambling. He said he's spoken with more than 30 other founders, and talked to a finance chief from a billion-dollar startup who has tried to move more than $45 million out of SVB to no avail. Another company with 250 employees told him that SVB has "all our cash."
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https://www.cnbc.com/2023/03/10/silicon ... bills.html
Circle’s USDC, the second-largest stablecoin, with $43 billion market capitalization, held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.
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https://www.coindesk.com/markets/2023/0 ... lley-bank/
