As a result of its collapse, Silicon Valley Bank is sending shockwaves worldwide. The sudden closure of their bank Friday has left companies across the Atlantic Ocean scrambling to figure out how to manage their finances. As a result of the meltdown, businesses as well as their employees may find themselves in distress, as their paychecks may get tangled in the chaos.
Gavin Newsom said Saturday that he is in contact with the White House to help “stabilize the situation as quickly as possible, to protect jobs and livelihoods, and to protect our entire innovation ecosystem.”
The Federal Deposit Insurance Corp provides insurance for U.S. customers who have less than $250,000 in the bank. The regulators are currently seeking a buyer for the bank to ensure that customers with more money can recover their losses, including those like Circle, an important cryptocurrency industry player. Circle has approximately $3.3 billion of the $40 billion reserves for its USDC coin at SVB, which led to a temporary drop in USD Coin’s value below 87 cents on Saturday as it tries to remain steady at $1. Nonetheless, according to CoinDesk, the value later increased back above 97 cents.
Saturday morning, startup companies on the other side of the Atlantic were surprised to discover that SVB’s U.K. business would no longer make payments or accept deposits. This decision was made by the Bank of England late Friday as part of its insolvency procedure, which will pay out eligible depositors a maximum sum of 170,000 British pounds ($204,544) for joint accounts at an accelerated pace. Dom Hallas, executive director of Coadec – an organization representing British startups – acknowledged that many startups and investors in the ecosystem with significant exposure to SVB UK are likely to be anxious about this announcement.
During the collapse of SVB UK, the Bank of England announced it would sell its assets to repay creditors. Startups are not the only ones suffering. The bank’s collapse is affecting another important California industry: fine wines. Hirsch Vineyards in California’s Sonoma County has been a major lender to vineyards since the 1990s. “This is a huge disappointment,” said Hirsch.
Hirsch remains optimistic about her own business, but expresses concern for smaller vintners seeking credit to expand. She notes that these lenders possess a deep understanding of the wine industry and their disappearance will have significant ramifications on this realm, especially given rising interest rates. Meanwhile, in Seattle, Stefan Kalb, CEO of Shelf Engine, has shifted his attention from running his startup to navigating emergency meetings centered around payroll concerns.
“It’s been a brutal day. We literally have every single penny in Silicon Valley Bank,” Kalb said Friday, putting the deposit amount at millions of dollars. While he plans to claim $250,000, he will not be able to pay Shelf Engine’s 40 employees for long. That could force him to decide whether to furlough employees until the mess is cleaned up. Kalb hopes that the bank will be sold over the weekend.
According to Tara Fung, the CEO and co-founder of Co:Create, a tech startup that facilitates the creation of digital loyalty and rewards programs, her company has diversified its banking relationships beyond Silicon Valley Bank. As such, they were able to transfer their payroll and vendor payments to another bank last Friday. Fung explained that they chose Silicon Valley Bank as a partner due to its reputation as the industry leader in tech firm banking partnerships. She expressed disappointment at how some individuals have linked the bank’s recent difficulties with cryptocurrency ventures unfairly while taking pleasure in its misfortunes.
Although Andrew Alexander, a calculus instructor at a San Francisco private high school that utilizes Silicon Valley Bank, is not excessively concerned since his upcoming pay won’t arrive for another fortnight and he believes that most of the complications will be resolved by then. Nevertheless, he is anxious about his acquaintances whose livelihoods are more closely linked to the tech sector and Silicon Valley. “I feel terrible for my friends who work in startups,” expressed Alexander. “They’re extremely frightened right now, which is understandable.”