- Silicon Valley Bank’s stock price fell on Tuesday after it announced it would sell new shares.
- The news sent panic on social media, with Twitter users speculating about a potential bank run.
- The founders who do business with SVB say they are not yet worried and call for calm.
As a meltdown unfolds at Silicon Valley Bank, startup founders who do business with the legendary institution are calling for calm.
“The idea of being preoccupied with depositing at SVB is the most paranoid, delusional way to think about it,” said Scott Painter, co-founder and CEO of electric car subscription startup Autonomy. “They’re the go-to bank for Silicon Valley. It’s not like there’s a fatal flaw in their operations or what they do.”
His show of support comes with a disastrous day for SVB, a benchmark bank for the tech industry which saw its share price plunge more than 60% on Thursday after news broke of the fire sale of 21 billion from its bond portfolio, which led to a loss of $1.8 billion. Due to this loss, SVB said it would raise approximately $2 billion from investors by selling shares and issuing related securities. This has caused some VCs and founders to worry about the financial strength of their banking institution.
This has caused some VCs and founders to worry about the financial strength of their banking institution.
The SVB lends money to startups and keeps their cash deposits, so they can pay for staff and other expenses. If startups are worried that the bank can’t give them all the money in their bank accounts, they might withdraw their accounts. Essentially, a bank rush – in Silicon Valley.
On Thursday, notable venture capital firms such as Founders Fund, Y Combinator and Redbeard all said they were strongly advising their portfolio companies to pull their funds from SVB following a Twitter frenzy.
Some founders, however, say they aren’t worried yet.
“As far as I can remember, SVB has been a very big figurehead in startups,” said Loop co-founder and CEO John Henry. “They’re super nice to the founders, and you could say they’ve found themselves in a vulnerable position. That’s why we have a collective responsibility to talk about SVB to deter any fear or self-fulfilling prophecy.”
Henry added that he had received calls today from concerned investors but after reviewing SVB’s financial situation with his operations team he was confident in his decision to stay with the bank.
On Twitter, someone else blamed SVB’s troubles on annoyed VCs.
“There’s a bank rush going on at SVB just because junior VCs have nothing better to do than text their founders ‘hey, did you see what happened with SVB shares? You might want to withdraw your money in case there’s a bank run,'” writes entrepreneur Evan Moore.
Siqi Chen, founder of fintech startup Runway, told Insider that while his startup doesn’t do business with SVB, he thinks many of the concerns posted on social media are overblown — although he appreciates the difficult situation. in which some founders currently find themselves.
“SVB seems to be doing well, but at the same time there’s this feeling around the founding community that if there’s even a 0.1% chance something could happen, it can be anxiety-provoking,” he said. -he declares. “Just look at FTX, Crypto and Silvergate.”
“Fanking the flames of a bank run is a bad look for everyone and I don’t want to be a contributor,” Chen also added. Tweeted.
“I’m not the least bit worried”
Few VCs came out in favor of SVB, but Upfront VC’s Mark Suster urged other members of the venture capital community talk and calm the panic.
“I think the biggest risk for startups AND VCs (and for SVBs) would be mass panic,” he wrote on Twitter. “Classic ‘bank runs’ hurt our whole system. People make public jokes about it. It’s not a joke, it’s something serious. Please treat it as such.”
Painter, the founder of Autonomy, says it remains phaseless.
“Anyone who says you should only have a limited amount of it with them, that’s unwise. That’s stupid. Why would you create that kind of panic?” he said. “I have about ten million dollars with them and I’m not the least bit worried. I’m going to buy their shares today.”