- Some SVB rivals have publicly encouraged tech customers to move their money.
- Behind the scenes, bankers from other competing institutions were told not to poach SVB clients.
- “We can’t afford them to fail,” said a rival banker. “For the tech ecosystem, they are the ecosystem.”
With Silicon Valley Bank in crisis, rivals have surged, publicly encouraging tech customers to move their money.
“For founders concerned about the stability of their banking provider, we are working to accelerate the implementation of new @BrexHQ business account requests,” Brex tweeted Thursday.
Immad Akhund, CEO of Mercury, a startup-focused bank, tweeted a link where founders can open an account and speak with a sales representative.
“Since my DM+emails are going a little crazy and I can’t offer the same level of personal service as usual,” he wrote. “If you want to get a Mercury bank account fast, please use this link and we’ll try to prioritize. Although normal signups are also fast!”
First Republic’s marketing department, which serves startups and venture capitalists, sent out a memo with talking points about First Republic’s strength, according to a person there. This person asked not to be identified while discussing the case.
Even giant JPMorgan has sought to convince some SVB clients to move their funds, according to The Information.
SVB shares fell more than 60% on Thursday. It came after the bank carried out a fire sale of $21 billion bonds, which resulted in a loss of $1.8 billion, thanks to higher interest rates and other factors. 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.
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. SVB’s media and investor relations departments did not return an email seeking comment on Thursday.
“We can’t afford them to fail”
Behind the scenes, some bankers at other competing institutions have been told not to actively poach SVB clients due to SVB’s importance to the tech industry and the wider banking sector, according to a tech banker from foreground who asked not to be identified while discussing a sensitive topic.
“The instructions were that no one should take this as a good thing,” the person said. “We can’t afford them to fail. To the tech ecosystem, they are the ecosystem.”
The banker described their phone ringing nonstop on Thursday with panicked startup founders and CEOs desperate to get their money out of SVB. However, opening new accounts to move millions of dollars in a day is usually not possible as banks must complete a host of regulatory requirements that normally take a week.
“We can’t just flip a switch on their accounts,” the banker said. “You must be approved.”
Many founders and VCs who had already weathered the dotcom meltdown and the global financial crisis were already prepared for this kind of event by having multiple accounts at different institutions and they already moved their money in the first hour “this morning”, according to the banker. “It has a self-fulfilling prophecy that none of us want to see. It’s a classic run on the bank.”
‘It’s not worth the shot’
Illustrating the problem, a person from Red Beard Ventures, a web3-focused investment syndicate, said they didn’t believe SVB was going under, but they didn’t want to take risks either, so she was trying to withdraw her $4.5 million as soon as possible. as possible.
“It’s not worth it,” said the person, who was not authorized to speak publicly. “We have a duty to move our money. We don’t think they’re going to sink, but we don’t want to be the ones holding the bag.”
Other venture capitalists urge caution and said they tell their founders not to worry.
“We sent a missive to everyone not to panic and stay calm,” said a venture capitalist who asked not to be identified and was reached by cellphone on a gondola in Aspen. .
“We also left our own money in SVB,” Upfront Ventures managing partner Mark Suster tweeted Thursday. “If the market can avoid the panic, I think things will settle down quickly. Hopefully that will be the case.”