Benjamin Fanjoy/Associated Press
- Some VC firms have started moving their money back to Silicon Valley Bank.
- That’s just days after the bank was shuttered by the regulators and the FDIC took over.
- A general partner at Founder Collective said there is “zero risk” in SVB, now that it’s backed by the FDIC.
Silicon Valley Bank’s been on a bizarre roller-coaster ride these past few days.
Just days after being shut down by regulators and taken over by the Federal Deposit Insurance Corporation, or FDIC, some VC firms have moved their money back to Silicon Valley Bank — and they’re vocal about the return.
Founder Collective, a seed-stage VC fund, tweeted that it has decided to move some deposits back to the newly formed Silicon Valley Bridge Bank. The bridge bank took over the deposits of the Silicon Valley Bank, a financial institution that served nearly half of all US venture-backed companies, per its website.
David Frankel, a general partner at Founder Collective tweeted the decision Tuesday, saying there is “zero risk” in Silicon Valley Bank now that it’s backed by the FDIC.
—David Frankel (@dafrankel) March 14, 2023
The Wall Street Journal reported Wednesday that Founder Collective moved a “meaningful” amount of money back to the bank.
Eric Paley, another general partner at Founder Collective, tweeted: “SVB is a pillar of the tech ecosystem, and we want to see it continue and thrive again. Those who feel the same should consider joining us knowing the bank is stable and fully backed by @FDICgov.”
Founder Collective did not immediately respond to a request for comment sent outside regular business hours.
Another group of VC firms also came out in support of Silicon Valley Bank, issuing a joint statement on Tuesday.
“As venture capitalists and customers of SVB, we are recommending our portfolio companies to keep or return 50% of their total capital with SVB,” Hemant Taneja, the CEO and managing director of the VC firm General Catalyst tweeted on Tuesday.
“We believe SVB is now one of the safest and most secure banks in the country,” the statement added.
—Hemant Taneja (@htaneja) March 14, 2023
Taneja also started a drive for VC firms to express their support for Silicon Valley Bank over the weekend.
“Silicon Valley Bank has been a trusted and long-time partner to the venture capital industry and our founders,” according to a statement that has been signed by 678 VC firms as of Thursday. The firms said they would be “strongly supportive” and encourage portfolio companies to resume banking relationships with the bank if it were to be bought and capitalized.
Even the new CEO of Silicon Valley Bridge Bank is rallying support for the Silicon Valley Bridge Bank, asking customers to help the lender by moving back the money they had withdrawn:
“The number one thing you can do to support the future of this institution is to help us rebuild our deposit base, both by leaving deposits with Silicon Valley Bridge Bank and transferring back deposits that left over the last several days,” Tim Mayopoulos said Tuesday.
It’s a sudden U-turn from the uncertainty and crisis of confidence
The support for California-based Silicon Valley Bank is a turnaround from the uncertainty and crisis of confidence that plagued the lender last week, leading to a bank run.
At the time, the tech and VC community posted about their anxieties about the bank’s financial health on Twitter.
Some company leaders even pulled their money out of the bank — like for instance, Founders Fund, billionaire tech tycoon Peter Thiel’s venture firm. Even so, Thiel told the Financial Times on Thursday he had $50 million of his own money stuck in the bank.
By the end of Thursday, nervous Silicon Valley Bank clients withdrew $42 billion of deposits, leaving the bank with a negative cash balance of $958 million, per a California regulatory filing.
The bank run at Silicon Valley Bank triggered concerns about the financial health of smaller, regional banks in the US, spurring a crisis of confidence in the sector. On Sunday, regulators shut Signature Bank, New York after a run on deposits.
Elsewhere in the world, jitters about the banking sector hit Switzerland’s Credit Suisse, causing its shares to tank as much as 36% this week amid fears of a default.