Silicon Valley Bank’s HQ in Santa Clara, California
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Silicon Valley Bank’s collapse has left hundreds of startups facing a cash crunch and payroll crisis.
A popular toy store held a 40% off sale to raise funds.
Their best hope for paying staff is a buyer being found for SVB before markets open on Monday.
Hundreds of startups face a massive cash crunch if the search for a buyer for Silicon Valley Bank drags into next week.
The Federal Deposit Insurance Corporation (FDIC) took control of SVB Friday after it was shut down by California regulators when a failed $2.3 billion capital raise sent its stock crashing.
It leaves hundreds of startups that deposited their cash with the bank in turmoil, as they try to continue operating while millions in funds are locked up.
In the meantime, signs of stress among SVB’s entrepreneurial clients are beginning to emerge.
Startups scramble for cash
The need for startups to make payroll is one being echoed across the VC ecosystem.
In a tweet, founder Nikita Bier said: “The number of growth stage companies that had their cash at SVB is huge. Making payroll next week is going to be a s—show.”
Sam Lessin, a partner at Slow Ventures, told CNBC Friday a founder he had spoken to planned to cover payrolls personally and “figure it out from there.”
Even startups that didn’t bank directly with SVB have been hit by its collapse. My Insider colleagues April Joyner and Madeline Renbarger reported the healthtech startup Flow Health used Rippling, which held an account with SVB, as its payroll provider.
“We literally have no way of paying employees right now,” Flow Health CEO Alex Meshkin told Insider.
Some startups took drastic steps on Friday to try and bring cash in. The popular toy store Camp told its customers it was in distress after its funds got trapped by the collapse.
“All of our cash was at SVB and we are trying to build up our balance at Chase,” Camp CEO and cofounder Ben Kaufman told Insider via Twitter direct message.
The company announced a 40% off sale in a bid to raise cash from its customers, instructing them to use the tongue-in-cheek code ‘BANKRUN’ at the checkout.
The ripple effects of SVB’s demise are likely to be extensive. According to its website, the bank supported nearly half of US venture-backed startups at the end of December.
Source:: Business Insider