Silicon Valley Bank collapse rattles startups in Denver area
The largest American bank failure in more than a decade sent a shock wave through Colorado's startup sector, but local banks are expressing confidence in their standing.
Driving the news: Silicon Valley Bank's collapse Friday sent local startups in the technology and life sciences arenas scrambling to ensure access to cash needed for payroll and expenses and moving their money to safer places.
- The U.S. government took control of the bank — which has an office in Denver — but didn't announce until late Sunday that it would guarantee all deposits.
Zoom in: Chris Erickson at venture capital firm Range Ventures told Axios Denver that 13 of the 21 companies in their portfolio banked with SVB. Some acted quickly to move their money to safer havens, while others are still in the queue for transfers after urgently creating new bank accounts.
Details: In the stressful weekend of uncertainty, Range's leaders made personal loans to some of their companies, though Erickson declined to say how much. "We have close enough relationships with our founders and trust that we felt comfortable loaning them personal money," he said.
- The turbulence calmed Monday after government assurances, which Erickson called a "best-case scenario."
Between the lines: California-based SVB became a key player in the Denver-Boulder tech sphere, often dubbed Silicon Mountain.
- The bank understood that young companies often had little or no revenue, and their workers often had wealth concentrated in stock options that could not yet be exercised or sold, Axios found. It made it the easiest bank for startups to tap.
- Boulder Chamber president John Tayer told BizWest it was working closely with local companies to "identify support resources that will allow them to bridge through this situation.”
Of note: In statements, Colorado banking leaders assured the public Monday they are on solid footing even as their stocks fell. Denver-based HTLF Bank, a subsidiary of Heartland Financial, was down 8%, but CEO Bruce Lee said in an open letter that the bank's financials are strong, the Denver Business Journal reported.
- Still, other banks were clearly spooked and declined to discuss the market with Axios Denver.
- "As of now, we don’t foresee any negative local impact on our member banks," said Michael Van Norstrand, the executive director of Independent Community Bankers of Colorado, in a statement.
What's next: Erickson said he's hoping to see SVB acquired by a company that can restore trust and resume its role in the startup world. "They have been an amazing partner to early-stage companies," he said.
- In the meantime, he's advising his companies to find secure banks with strong FDIC protections and options to conduct cash sweeps to automatically move money when needed.
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