Hi folks, Kylie Robison from the tech team here. I’m at ground zero for tech-branded apparel, also known as South by Southwest (SXSW). Just as the party is getting started here in Austin, Texas, the toast hit the floor, marmalade-side down.
Silicon Valley Bank, one of the most prominent lenders and banks in the private market ecosystem, went belly up on Friday forcing the Federal Deposit Insurance Corporation (FDIC) to take over. The dramatic ending to the backbone of the Silicon Valley startup ecosystem just before SXSW’s weekend festivities kicked off is likely going to lead to a shortage of martinis in the city.
Founders, VCs, and tech journalists' phones haven’t stopped chirping since Wednesday when SVB said that it was offloading securities and looking to raise billions through a public share sale to cover significant losses on its balance sheet to the tune of $1.8 billion. Just as I was enjoying my obligatory preflight beer, the notifications blowing up my phone nearly forced it into seppuku. From San Jose to Austin, I’ve been writing non-stop about the fiasco, much like the SVB bankers who worked around the clock only to find the company insolvent before the weekend.
As emotional spirits weaken and physical spirits strengthen—I cannot emphasize enough how many sad founder and VC martinis will be had—many are left to figure out just how much money they lost.
If you’re not plugged into this world or weren’t cognizant in 2008, you might be wondering why this particular bank bursting into flames matters. To put it simply, startup founders who have a lot of capital saved at SVB could lose access to that capital for an indiscriminate amount of time. As economists debate whether we’re really in a recession or not, now is not a great time to lose access to the money that keeps your startup afloat.
In a blog post from the FDIC, the institution attempts to assuage those fears, the agency announced that “all insured depositors will have full access to their insured deposits no later than Monday morning,” and it “will pay uninsured depositors an advance dividend within the next week.” In other words, it's still entirely unclear how screwed some of these founders are.
It’s cloudy here in Austin, with weather predictions anticipating thunder and showers, making this week’s parade especially rained on.
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Kylie Robison
Data Sheet’s daily news section was written and curated by Andrea Guzman.
