Deposits of up to $250,000 were insured by the regulator. On Friday, the Federal Deposit Insurance Corporation took control of Silicon Valley Bank’s $175 billion in customer deposits. The bank was a “systemically important financial institution” whose services were “immensely enabling for start-ups,” said Matt Ocko, an investor at the venture capital firm DCVC. It managed the personal wealth of many tech executives and was a stalwart sponsor of Silicon Valley tech conferences, parties, dinners and media outlets. Silicon Valley Bank was also a bank to more than 2,500 venture capital firms, including Lightspeed, Bain Capital and Insight Partners. On top of that, the fall of Silicon Valley Bank was especially troubling because it was the self-described “financial partner of the innovation economy.” The bank, founded in 1983 and based in Santa Clara, Calif., was deeply entangled in the tech ecosystem, providing banking services to nearly half of all venture-backed technology and life-science companies in the United States, according to its website.
start-ups dropped 31 percent last year to $238 billion, according to PitchBook.
Hurt by rising interest rates and an economic slowdown over the past year, start-up funding - which had been supercharged by low interest rates for years - has shriveled, resulting in mass layoffs at many young companies, cost-cutting and slashed valuations. The implosion rattled a start-up industry already on edge. And many in the tech industry were glued to Twitter, where the collapse of a linchpin financial partner played out in real time. Lines formed outside the bank’s branches. Investors doled out and asked for advice in memos and on emergency conference calls. Entrepreneurs raced to get loans to make payroll because their money was frozen at the bank. Her despair was part of the fallout across the start-up ecosystem from the failure of Silicon Valley Bank. And on Friday, Silicon Valley Bank collapsed, tying up cash totaling eight figures for her company, which delivers food to Medicare and Medicaid participants. On Thursday, after reading about financial instability at the bank, she rushed to move FarmboxRx’s money into two other bank accounts.
She was setting out to raise venture capital and knew the bank was a go-to for the start-up industry. Ashley Tyrner opened an account with Silicon Valley Bank for her company, FarmboxRx, two years ago.
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