Silicon Valley Bank collapsed in the USA. Startups from Silicon Valley kept the money in

Silicon Valley Bank, the largest startup credit institution in the US, exploded. The New York Times writes that the bankruptcy of a financial institution has drastically affected global markets and that entrepreneurs can lose billions of dollars.

Several customers of the bank applied to the Silicon Valley Bank branch on March 10 and only saw locked doors. Bloomberg added that the bank’s problems arose after San Francisco-based venture capital firm Peter Thiel’s Founders Fund and other well-known firms advised portfolio companies to withdraw money from the bank.

Entrepreneurs rushed to take out loans to pay their salaries as their money was frozen in the bank. Due to rising interest rates and the economic downturn last year, funding for start-ups has dwindled, leading to mass layoffs, lower costs and lower value for many companies.

Investment in startups in the US fell 31% last year to $238 billion, according to PitchBook. Silicon Valley Bank’s fall made the situation worse, as it was seen as a “financial partner of innovation.”

Silicon Valley Bank’s downfall: key facts about the financial institution

Founded in 1983, the Santa Clara, California-based bank quickly entered the tech ecosystem, banking nearly half of all technology and life sciences venture capital firms in the US.

Silicon Valley Bank has been the bank of more than 2,500 venture capital firms. At the end of 2022, Silicon Valley Bank had approximately 209 billion assets and more than $175 billion in total deposits.

“It was a systematically important financial institution, its services were extremely convenient for beginners,” said Matt Oko, an investor at DCVC venture capital firm.

On March 10, the US Federal Deposit Insurance Corporation (FDIC) took control of $175 billion in Silicon Valley Bank client deposits. Up to 250,000 deposits are insured by the FDIC, but customers were not informed when access to the money would be granted.

Silicon Valley Bank went bankrupt: How is the business reacting to the situation?

TV broadcasting company Roku said about $487 million of its $1.9 billion cashback is tied to Silicon Valley Bank. The company did not insure the deposits, so it does not know how much it can return.

Josh Butler, CEO of security analytics startup CompScience, was unable to withdraw money from the bank.

“Everyone from my investors to my employees to my moms is reaching out to us to find out what’s going on. The question is, how soon will we get the rest of the funds, if we will. It’s really scary,” Butler said.

CompScience has suspended marketing, sales and hiring spending until it resolves payroll issues.

Non-tech startups also faced the consequences of the bank’s downfall. Vox Media, publisher of New York Magazine and The Verge, has substantial money in Silicon Valley Bank. The company’s credit cards issued by a Silicon Valley bank stopped working on March 10.

Video game maker Roblox Corp RBLX.N said it has hundreds of millions of dollars in bank deposits, Reuters reported.

Camp retail CEO Ben Kaufman sent customers a letter offering 40% off products to make up for the loss.

Some organizations took advantage of the bank’s collapse. Startup financial services provider Brex has created an “emergency loan” for new customers transferring from Silicon Valley Bank. The service helps startups increase payroll costs.

According to a person familiar with the situation, on March 9, Brex received billions of dollars in deposits from several thousand companies.

Recall that Leonid Radvinsky, the owner of the OnlyFans platform, a native of Ukraine, will receive an unexpected income of more than $ 500 million.

Focus In July, Sri Lankan Prime Minister Ranil Wickramasinghe wrote that the country declared bankruptcy. One of the reasons for this situation is the all-out war between Russia and Ukraine.