From wine country to London, Silicon Valley’s bank failure is shaking the world

NEW YORK (AP) — It was called Silicon Valley Bank, but its collapse is causing consternation around the world.

From winemakers in California to startups across the Atlantic, companies are scrambling to figure out how to manage their finances after their bank’s sudden shutdown on Friday. The collapse means heartbreak not just for businesses but for all their workers whose wages could be tied up in the mess.

California Gov. Gavin Newsom said Saturday he was talking to the White House to help “stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods and the entire innovation ecosystem that has served as a pole stage for our economy”.

US customers with less than $250,000 in the bank can rely on insurance provided by the Federal Deposit Insurance Corp. Regulators are trying to find a buyer for the bank in the hope that customers with more of them can be settled.

This includes clients like Circle, a major player in the cryptocurrency industry. He said he has approx 3.3 billion dollars from SVB’s roughly $40 billion in USDC reserves. This caused the value of the USD Coin, which is trying to hold steady at $1, to briefly fall below 87 cents on Saturday. It later climbed back above 97 cents, according to CoinDesk.

Across the Atlantic, startups woke up on Saturday to find that SVB’s UK business will stop making payments or accepting deposits. The Bank of England announced late on Friday that it will place Silicon Valley Bank UK into insolvency proceedings, which will pay eligible depositors up to 170,000 British pounds ($204,544) for joint accounts “as soon as possible”.

“We know there are a large number of startups and investors in the ecosystem that have significant exposure to SVB UK and will be very concerned,” Dom Hallas, chief executive of Coadec, which represents UK startups, said on Twitter. He reported “anxiety and panic.”

The Bank of England said SVB UK’s assets would be sold to pay creditors.

It’s not just startups that are feeling the pain. The bank’s collapse has implications for another major California industry: fine wines. It has been a strong lender to vineyards since the 1990s.

“This is a huge disappointment,” said winemaker Jasmine Hirsch, the general manager of Hirsch Vineyards in Sonoma County, California.

Hirsch said she expects her business to be fine. But he worries about the wider implications for smaller vintners seeking lines of credit to plant new vines.

“They really understand the wine business,” Hirsch said. “The disappearance of this bank, as one of the most important lenders, will certainly have an impact on the wine industry, especially in an environment where interest rates have risen.”

In Seattle, Shelf Engine CEO Stefan Kalb found himself mired in emergency meetings devoted to figuring out how to meet payroll instead of focusing on his startup’s business of helping grocers manage their food orders.

“It was a violent day. We literally have every penny in Silicon Valley Bank,” Kalb said Friday, capping the amount of the deposit that is now tied up in the millions of dollars.

He’s making a claim for the $250,000 limit, but that won’t be enough to keep paying Shelf Engine’s 40 employees for long. That could force him to decide whether to start laying off employees until the mess is cleaned up.

“I’m just hoping the bank is sold over the weekend,” Kalb said.

Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, said her company uses multiple banks in addition to Silicon Valley Bank so it can transition payroll and supplier payments to another bank on Friday.

Fung said her company chose the bank as a partner because it is the “gold standard for tech companies and banking partnerships,” and she was upset that some seemed to play up its failure and unfairly link it to skepticism about cryptocurrency ventures.

San Francisco-based employee performance management company was among Silicon Valley Bank depositors who rushed to get their money out before regulators seized the bank.

Co-founder David Murray credits an email from one of Confirm’s venture capitalists that urged the company to withdraw its funds “immediately,” citing signs of a bank run. Such actions accelerated the flight of cash, which led to the collapse of the bank.

“I think a lot of founders shared the logic that, you know, there’s no downside to raising the money to be safe,” Murray said. “And so we all did, hence the bank run.”

The US government must act more quickly to prevent further damage, said Martín Varsavsky, an Argentinian businessman with investments in the technology industry and Silicon Valley.

One of his companies, Overture Life, which employs about 50 people, had about $1.5 million in deposits with the financially troubled bank, but can rely on other holdings elsewhere to pay payroll.

But other companies have high percentages of their cash in Silicon Valley Bank and need access to more than the amount protected by the FDIC.

“If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine,” Varsavsky said on Saturday. “But if they stick to $250,000, it will be an absolute disaster in which so many companies will not be able to pay payroll.”

Andrew Alexander, a calculus teacher at a private San Francisco high school who uses Silicon Valley Bank, wasn’t overly concerned. His next paycheck isn’t due for another two weeks, and he’s confident many of the issues can be resolved by then.

But he worries about friends whose livelihoods are more deeply intertwined with the tech industry and Silicon Valley.

“I have a lot of friends in the startup world who are kind of terrified,” Alexander said, “and I really feel for them. It’s very scary for them.”

AP writers Matt O’Brien, Michael Liedtke and Alex Veiga contributed.

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