Posted on 03/11/2023 12:09:25 PM PST by EBH
Hundreds of startups face a massive cash crunch if the search for a buyer for Silicon Valley Bank drags into next week.
The Federal Deposit Insurance Corporation (FDIC) took control of SVB Friday after it was shut down by California regulators when a failed $2.3 billion capital raise sent its stock crashing.
It leaves hundreds of startups that deposited their cash with the bank in turmoil, as they try to continue operating while millions in funds are locked up.
In the meantime, signs of stress among SVB's entrepreneurial clients are beginning to emerge.
The need for startups to make payroll is one being echoed across the VC ecosystem.
In a tweet, founder Nikita Bier said: "The number of growth stage companies that had their cash at SVB is huge. Making payroll next week is going to be a s---show."
Sam Lessin, a partner at Slow Ventures, told CNBC Friday a founder he had spoken to planned to cover payrolls personally and "figure it out from there."
Even startups that didn't bank directly with SVB have been hit by its collapse. My Insider colleagues April Joyner and Madeline Renbarger reported the healthtech startup Flow Health used Rippling, which held an account with SVB, as its payroll provider.
(Excerpt) Read more at businessinsider.com ...
You clearly don’t have a clue. I am the CEO of a company that has had successful 25 year relationship with SVB. We’re not a start up but a strong company with 75 employees who will need paychecks this week. How does a company handle a $250k limit. Occasionally a customer will pay their invoice, sometimes well over a million and it sits on our SVB account until we use it to buy more inventory or pay the rent on our warehouse our pay or employees or their health insurance. There been no lavish spending or free food on my watch and yet you think you know the reality. Perhaps you’ll make one of my employees mortgage or truck payments on Friday. Or how about some groceries? It is easy to mature sweeping comments based on ignorance when you’ve got nothing on the line. I’m spending the weekend with my management team trying to figure out how to keep the company alive.
They need to find actual jobs. The last time I checked, Starbucks is still hiring. Perfect for their skill set.
Thanks for posting.
For folks who do not understand your post is what “financial contagion” is all about...
Because...
Not only do you have to meet your payroll but you have vendors to pay who have to meet their payroll and pay their vendors etc on down the line....
I had a small business back in the day—rising interest rates killed me dead.
Good luck, and perhaps you saw my likewise response to this jack wagon.
Just curious - what do you think the odds are of a white knight coming in early next week and not only saving SVB, but making good - perhaps just "mostly" - on deposits over the FDIC guaranteed limit?
I figure if SVB or its successor is going to have any kind of "trusted" reputation in the future, those deposits can't just go "poof"…
Most of these startups are DEI/LGBTQIININPN/ESG woke youngsters who would kill us.
I hope they lose it all.
We heard they were close to a deal over night Thursday but the stock tanked so fast Friday morning they couldn’t get it done before the Fed shut them down. Hopefully they’re going to get something done this weekend.
And I just want to remind my fellow FReepers that while - yes - there can be a lot of wokester/jokester youth in the startups, they're there now in the established companies as well.
For many established professionals who don't want to deal with the nonsense of corporate life - DEI or otherwise - starting up their own company is a great path. Don't be so blind in your hatred that you bring hardship on those on the battlefield that agree with you.
Thanks for sharing. So many do not understand the implications of this bank closure.
The propaganda to bail out these fools continues apace.
The one question lurking in my mind is this: The crisis in the news is the bank’s shortage of cash … but is there also a balance sheet of bad loans lurking in the background?
From what I've heard the balance sheet problem is one of yield mismatch (holding too much low yield paper) not of bad loans.
I'd look to see how many loans are connected to commercial real estate purchases made in 2019 or earlier. That's a bubble that has burst and will continue (IMHO) to burst in 2023.
From what I’ve heard, the issue was they had a lot of relatively low yield bonds on the balance sheet and the Fed’s rapid and sizable interest rate hikes made them near impossible to unload.
SVB bank failure is huge, since SVB was a top bank for top businesses. It is reasonable that a bank highlights victim groups and downplays customer accounts would fail.
Yes, it is. Judging from many of the comments on the threads/posts, many even here on FR do not quite grasp it yet. I figure because they never heard of SVB until a few days ago.
It is why I say everyone should start a business at least once in their lifetime ...succeed or fail.
We’re accustomed to saying “thank you for your service” to our military and police - but thank YOU for what you do! You are the life blood of our country and the last of the true adults.
Not my problem. That is what you are overpaid to figure out. No BAILOUTS period! Our country is broke and I could give a rat’s ass about a whining CEO of a company. You should be fired for not keeping abreast of where your money is and how solvent your bank is.
Disgusting to equate what a CEO does to the extreme hardship that our underpaid young enlisted go through. This CEO should be fired for not keeping track of where his company’s money is and how safe it is.
What are the odds that the gov’t will make the losers whole?
You said it, you’re not a startup. Fact of the matter is SVB catered to most startups in the tech world, many of whom have operated irresponsibly and with an undiversified bank. I’ve worked in the tech startup world, am an investor in some caught up in the SVB mess, and have been around somewhat high profile CEOs who lavish their executive teams with perks and junkets around the world while shooting for an IPO, and had to be reigned in. Yes, unfortunately a lot of good people may get wrecked in this mess.
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