SA国际传媒

The stunning move by the FDIC to take over on Friday left venture firms and their portfolio companies staring at a great unknown many never thought possible.

SVB works with more than half of all U.S.-based startups and is the preeminent provider of venture debt in the industry. Its collapse leaves open gaping questions among startups about cash flow and access as bank regulators moved in.

The bank held $175.4 billion in deposits as of Dec. 31, and 93% of those are uninsured, according to regulatory filings. That leaves unresolved how thousands of companies in Silicon Valley鈥檚 intricately connected tech sector who banked at SVB and were unable to access their deposits will make payroll or pay vendors and rent, if those funds remain inaccessible.

, founder and managing partner at New York-based early-stage investment firm, said some portfolio companies have already expressed concerns 鈥� not about meeting payroll, but about access to cash for other expenses after the FDIC鈥檚 takeover.

Insured deposits of up to $250,000 held at SVB are protected, regulators said Friday. Uninsured depositors will receive a 鈥渄ividend鈥� of an unspecified amount next week, the FDIC said, and a 鈥渞eceivership certificate for the remaining amount of their uninsured funds.鈥�

As the bank鈥檚 assets are sold, 鈥渇uture dividend payments may be made to uninsured depositors,鈥� the FDIC said.

Many VC firms have stepped up to assure startups they will be provided bridge loans if necessary as the SVB drama plays out, Bloomer said.

Even as early as Thursday, some VCs were already preparing for the worst, telling portfolio companies to diversify where they keep their cash and ensure no more than $250,000 is in one bank.

Some also were telling their portfolio companies to make sure they had easy access to at least six months of cash burn in case the unthinkable happened.

Looking for a buyer?

SVB鈥檚 client roster includes some of the most prominent venture firms in Silicon Valley, from to and . According to data pulled from SA国际传媒, the bank participated in 75 founding rounds last year 鈥� mainly involving venture debt 鈥� that totaled $5.7 billion. That included leading a $200 million venture debt round for San Jose-based .

That deal number is likely low, as many private companies do not publicly divulge debt financings 鈥� but nevertheless shows how intertwined the bank has become with the tech startup ecosystem.

SVB has about $209 billion in total assets. In 2021, the bank took part in 73 rounds that totaled $3.1 billion, per SA国际传媒. Thus far this year, the bank has participated in eight announced rounds, whch includes leading a $30 million debt round for San Francisco-based .

Despite Friday’s shocking turn, many were already looking to what鈥檚 ahead for the 40-year-old bank, with most thinking a buyer is lurking somewhere.

鈥淭hey have a great business,鈥� Bloomer said. 鈥淭his was just a traditional bank run. This wasn’t like the meltdown in 2008. There were really no toxic assets.鈥�

, founder of Venture Debt Opportunity Fund, agreed that a buyer is likely out there and something could happen quickly due to SVB鈥檚 prominence in the tech world.

would be a logical buyer due to its balance sheet and known desire to get more into venture lending, Ellison said. Other bidders could include or, as both also have tried to increase their venture debt presence, he added.

鈥淪omeone will buy it,鈥� he said. 鈥淭hey have access and relationships in the valley that many banks see as crown jewels.鈥�

Ellison called the fall of SVB 鈥渕onumental,鈥� and added he already has been contacted by founders, VCs and lenders as concern has spread.

鈥淚t鈥檚 already had a ripple effect,鈥� Ellison said. 鈥淚t鈥檚 created a gap in the innovation funding market.鈥�

How SVB unraveled

SVB鈥檚 descent into receivership follows a dramatic decline in its stock price on Thursday after the bank said it had taken a $1.8 billion loss on bond sales in Q1 and was seeking to sell shares to raise additional capital to shore up its balance sheet. The share slide in turn prompted a bank run by depositors as panic spread about companies鈥� ability to get their money out.

SVB has said its balance sheet came under pressure after its startup clients began to draw down deposits. 鈥淲e are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses,鈥� the bank wrote in a to shareholders.

In an earlier to investors, SVB said client cash burn 鈥渞emains about 2x higher than pre-2021 levels and has not adjusted to the slower fundraising environment,鈥� seemingly illustrating that startups have not reversed their previous patterns of spending.

Illustration: Dom Guzman