Like many of you, we’ve watched the recent upsetting events at Silicon Valley Bank with great concern. While many downplay this as an isolated incident at a “small, regional bank,” I want to highlight that this is actually the second largest bank failure in the history of the United States.
Yes, SVB was regionally based, but they’ve been a cornerstone partner to many leading and innovative companies in the tech and venture capital world. In fact, their website boasted that around 50% of all US VC-backed tech and life sciences companies bank with them – an incredible number !
When events like these occur, the greatest pain is actually felt not by the institution itself, but by the individuals connected. Watching people in long lines trying to access their hard-earned money is difficult to watch – and all that on top of the hurt and widespread ramifications many companies (most in tech) are experiencing.
Many of these companies were not rolling the dice with new forms of cryptocurrency or even making an investment in SVB itself. These were their own cash deposits – monies collected from their investors and customers, held in nothing riskier than U.S. dollars.These funds are critical for the basic needs of running a business: for making payroll, paying suppliers (who will now experience delays or not get paid at all) and keeping the lights on in offices across the globe. There’s a true human cost to every financial collapse, but there is a difference between speculation, investment and a simple deposit in a bank.
We (Cyderes) are grateful to be unaffected by any of this, as we have no banking relationship with SVB. While our team works diligently to ensure our banking partners share our goals of sustained growth and reliability, many organizations partnered with SVB for precisely these reasons.
I have seen some critical reports in the media scolding these firms for partnering with SVB, saying they “should have known better” and not put all their cash in one place and never above the $250K FDIC insurance limit.
To be very clear, anyone making this comment has never actually run a business ! The idea of having multiple cash accounts for a business is completely unworkable, especially below those limits. Not all cases here are large businesses, but even SMBs would find this an untenable situation for even the most basic business functions.
A solid banking system is the absolute foundation of any advanced economy, and I applaud the recent FDIC announcement to make whole all depositors involved. In my personal opinion, there are things the government does well, and things government should stay out of, but we must have a system where cash deposits are fully protected. Unfortunately, there will be more SVBs in the future, and we must defend this fundamental tenet that underpins our economy.
Chief Executive Officer