Tech:NYC Digest: Special SVB Edition

Tech:NYC Digest: Special SVB Edition

March 12, 2023 • Estimated Reading Time: 8 minutes

Sunday, March 12, 2023A note from Tech:NYC President and Executive Director Julie Samuels:Tech:NYC has been closely monitoring the fallout from the Silicon Valley Bank collapse over the last 48 hours. We’re sending a special weekend edition of our newsletter to share what we know — and don’t — so far, plus other resources you may find helpful.Since Friday, we’ve been in touch with many of our industry leaders and partners in state and local government, as well as the New York delegation in DC, and continue to pursue ameliorating solutions on behalf of the New York startup community. Tomorrow will mark a critical juncture for preventing a contagion effect. One way you can help today: please reach out to members of the New York delegation and other federal elected officials to urge that the White House and Treasury clear a path for the acquisition of SVB’s assets by midnight tonight, March 12. This step is key to maximizing the chances that depositors are made whole and additional “runs” don’t create more severe risks to the US economy. More details are below on how to do this.This issue is quickly evolving, and the Tech:NYC team is committed to providing as much insight and support as we can. Company founders/executives: Please update us with the status of your company and how we can help by completing this short survey. And if you have any questions (or resources to share with the rest of our network), please don't hesitate to get in touch with our team here.

FAQWhat is the best case scenario?The best outcome would be a successful sale of SVB’s assets by tonight, March 12. An acquisition is important to protecting the small businesses and individuals who were bank customers — not the bank’s creditors or shareholders. The federal government – specifically, the White House, Treasury Department, and FDIC — must ensure a sale goes through so that a well-financed financial institution can assume SVB’s deposits and provide a continuity of service.Many of the startup founders and investors in our network are spending today delivering this message to federal officials. See more details at the end of this post for how to echo this important message.What is the size and scope of the impact?The exact scale of the impact is still being assessed, but SVB had $211 billion of assets under management, and half of US venture-backed technology and life sciences companies banked with SVB. (Source)Many of these companies are either based in New York or have employees who live and work in New York. Mayor Eric Adams addressed the collapse this morning, saying his administration is coordinating with the State and the New York delegation in DC to first and foremost protect the tech workers whose jobs and incomes are at risk.What can/should a depositor expect to happen with the FDIC? The FDIC notice says all insured depositors will have full access to their insured deposits (up to $250K) no later than Monday morning, March 13, 2023. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. We understand that the FDIC has managed to sell a significant portion of SVB’s assets already, and will use those funds to pay out depositors beyond the $250K in FDIC insurance. Details here still remain hazy, but there is reason to believe that depositors will eventually be made whole or nearly whole whether or not there is a sale, though it is unclear how long that might take.

  • Here’s more info from Gunderson Dettmer on what to know about FDIC receivership.

What about payroll and other time sensitive matters?This is why a sale this weekend is so important. Startups are scrambling to line up alternative funding for this week’s payroll (and the next few pay cycles) in case their deposits remain locked up. (Wall Street Journal) Please see bridge loan resources below.Founders in our network are prioritizing meetings with their boards and lawyers, as failure to make payroll could open up potential legal liability issues, which also vary state-by-state.

  • Here’s more info from Lowenstein on how to manage notice periods and communications with employees if you cannot make payroll. 

What else could happen before Monday that would impact outcomes?Absent a sale, the Federal Reserve is weighing creating a fund that would allow regulators to backstop more deposits if more banks run into trouble beginning tomorrow. (Bloomberg) If no backstops are put in place, there’s widespread concern a “contagion” scenario is possible and other banks — particularly smaller, regional ones — will see similar “runs.”

  • Biden on brink of banking crisis (Axios)

Are you a startup founder or tech worker in New York impacted by the SVB collapse? Please complete this short survey to share your insights to let us know how we can best help. All responses are optional and anonymized.

LOAN RESOURCES

  • AngelList: Tool allowing investors to provide emergency loans to companies

  • Brex: Emergency line offering bridge loans directly to qualified SVB customers

  • Capchase: Emergency payroll financing for SVB-impacted startups

  • Other bridge LOCs threaded here and non-dilutive funding ideas listed here

OTHER GUIDES

HOW TO HELP

Sign this Y Combinator petition to implore the US government to ensure that thousands of SVB depositors are made whole.Contact your federal elected officials to pressure the White House to act. Specifically, urge them to:

  • Clear a path for a sale. Implore the Treasury Department and FDIC to clear a path for the acquisition of SVB’s assets by tonight, March 12, to maximize the chances that depositors will be made whole.

  • Protect the small businesses most under threat. Without access to full deposits, there are thousands of small businesses that will fail to meet payroll this week, March 15, and in future pay cycles, putting hundreds of thousands of jobs at risk.

  • Make depositors whole. The bank’s customers — not its shareholders — are the top concern. If depositors aren’t made whole, there will be systemic risk as thousands of businesses (and their investors, which includes pension funds and other non-tech related institutions) and millions of individuals no longer think their money is safe at small or regional banks. This may cause dozens more bank failures as they concentrate all of their money into the largest banks.

  • Act quickly. With quick action, this crisis can be contained. Without immediate assurance made to depositors, there will be significant adverse consequences for small businesses, America’s innovation economy, and millions of Americans as deposits and confidence in our banking system is lost.

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