On March 10, 2023, a sign hangs at the headquarters of Silicon Valley Banks in Santa Clara, California.
Noah Berger | AFP | Getty Images
More than 300 venture capital firms have signed a joint statement promising to do business with Silicon Valley Bank again if it is “purchased and appropriately capitalized” after the financial institution failed Friday.
Supervisors closed the SVB and seized its deposits on Friday after a run on the bank on Thursday.
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Prior to the bank’s bankruptcy, Greg Becker, CEO of SVB, announced on Wednesday that he needed to suddenly raise $2.25 billion to strengthen the financial institution’s balance sheet. A dramatic wave of deposit withdrawals followed on Thursday.
Shares in the bank plummeted, triggering a trading freeze on Friday before California state regulators took over.
The SVB’s bankruptcy is the largest in US banking since the 2008 financial crisis and the second largest ever.
Some venture firms raised their own money and instructed their portfolio companies to withdraw their deposits from SVB before the run. Reportedly, Founders Fund, USV and Coatue were among those who did this.
Other venture investors lamented that guidance from influential companies, albeit cautious in a way, contributed to the run on a bank that has been a trusted financial partner of tech startups and companies that have invested in them for decades.
The Federal Deposit Insurance Corporation (FDIC) covers up to $250,000 per depositor and may begin paying depositors below that limit as early as Monday. However, it remains to be seen what portion of the deposits on SVB’s balance sheet will be fully or partially recovered and whether a direct buyer is ready to take over the bank’s operations.
In 2008, JPMorgan Chase acquired Washington Mutual Bank in a transaction facilitated by the FDIC.
As CNBC has reported, big names in technology and finance have called on the federal government to take dramatic action to protect depositors who were not below the $250,000 insured limit. Their main concern is that failing to protect deposits over $250,000 could damage confidence in other medium-sized banks.
Venture firms, including Accel, Cowboy Ventures, Greylock, Lux Capital and Sequoia, were among 325 companies that signed the letter Saturday night in California expressing a willingness to work with SVB again under new ownership.
The joint statement was shared by many individual venture capitalists on social networks after the bank’s bankruptcy. It said:
Silicon Valley Bank is a trusted and long-standing partner of the venture capital industry and our founders. For 40 years, it has been an important platform that has played a vital role in serving the startup community and supporting the innovation economy in the US.
The events that have unfolded in the last 48 hours have been very disappointing and worrying. In the event that SVB were purchased and appropriately capitalized, we would strongly support and encourage our portfolio companies to resume their banking relationship with them.”
Read the statement and the full list of investors support the SVB.