In the wake of the tumultuous shut down of Silicon Valley Bank and a weekend of uncertainty that has made national headlines, the local impact of the financial institution’s collapse in the tech-driven region was clear by the dozens of people who lined up outside the bank’s Santa Clara branch Monday.
Everyone was hoping to access their accounts and keep the lights on at their businesses.
“The past few days, it has been a little stressful,” Karthik Ramalingam told San José Spotlight. Ramalingam and his wife, who didn’t want to be named, are the co-founders of CodeLinkd, a company that teaches kids to code.
Ramalingam was one of nearly 50 people milling outside the bank at any one time, some with camping chairs. Many chatted quietly about their concerns with the bank’s collapse, as others checked their phones nervously and made calls.
Security guards escorted government officials and customers in and out of the building one at a time.
Federal officials shut down the bank Friday after uncertainty about its solvency led to a run on the bank—a crush of customers rapidly withdrawing funds faster than the bank could keep up.
Late Sunday, the Federal Reserve Board said it would protect all depositors of Silicon Valley Bank, and New York- based Signature Bank, which was shut down Sunday, allowing customers to access all their funds beyond the $250,000 insured by the Federal Deposit Insurance Corporation (FDIC).
Ramalingam and his wife are planning to pull their funds and redistribute it to other banks, hoping to avoid a similar fate in the future by not having all their business funds tied up in one financial institution.
“We’re just hoping to get through the line and get our money,” Ramalingam’s wife said. “We’ve been shopping around with other banks today to open up accounts. I think it’s a good lesson for us to know to diversify.”
Another man who runs a venture capital firm in Los Altos said several of his portfolio businesses are banked at Silicon Valley Bank, as are his personal funds. He was hoping to avoid dealing with the bank’s inundated website and withdraw cashier’s checks for his firm and several of his portfolio’s businesses on Monday.
He said the past three days have been stressful, and asked not to be identified to protect the privacy of the companies.
“I was trying to figure out within my portofolio who all had exposure to SVB, what was the level of that exposure, and then we immediately started focusing on what these companies needed to make their March payroll,” he told San José Spotlight.
He said the government’s actions to ensure businesses will be able to pull out their cash allows everyone to take a breath, but there is still uncertainty looming.
“My companies are not completely out of the woods yet, because while the funds are there and backstopped by the government, access to those funds is still delayed,” he said. “So once we have access and we can process payroll and get those funds into another account, then I think everyone will be relieved.”
A man named Phillip, who didn’t give his last name, hurried over to the bank Monday afternoon a little before 2:30 p.m. He was told the branch would close at 3 p.m. But officials had closed early due to the number of customers they were already working with, and he was turned away.
“I called the FDIC this morning, it was constantly busy, of course I expected that,” Phillip told San José Spotlight. “The bank website was running, but I wanted to pull all my money out today,” he said.
Phillip runs a medical device startup in San Jose, and said he’ll likely return to the bank branch early Tuesday morning to ensure he can get his money and make payroll for his small company.
“I have to do this as soon as possible, otherwise we’re going to stop (operating).”
Following the shutdown of Silicon Valley Bank, hundreds of business and venture capital leaders from around Silicon Valley spoke with Rep. Ro Khanna Friday, to air their concerns both for the short term solutions that have begun being worked out, and for longer term implications of the bank’s collapse.
Brook Byers, a senior partner at legendary Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, was one of several who said Silicon Valley Bank was more than just a checking account for many tech companies, offering them tools and connections in the industry.
“It helps and has banked thousands of companies, and hundreds of thousands if not millions of employees that are the technology and biotech innovators of our nation. This is our competitive resource,” Byers said. “This is the tech backbone of the nation, and our competitiveness with China and Russia and around the world.”
Khanna agreed, saying the bank has helped shape the business plans and companies for many entrepreneurs in the valley. Looking ahead, Khanna said the FDIC and the government should be “over-communicating” about every step of the process of taking over the bank and aiding customers.
“There are so many questions that people have,” Khanna said.
Contact Joseph Geha at [email protected] or @josephgeha16 on Twitter.
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