The failure, the first major bank collapse in nearly 15 years, spurred immediate concerns Friday and left companies scrambling to meet payroll and carry out other day-to-day operations.
Government action to protect uninsured deposits mitigated some of those risks, but the collapse, coupled with the fall of Signature Bank in New York over the weekend, is still posing concerns for the industry.
The impacts could be felt most aggressively by startups, which have already faced headwinds over rising federal interest rates and now may face a more hostile front from banks hesitant to take their business.
The issues are underscored by the fact that Silicon Valley may receive little empathy over the failure of the bank, with critics already sounding the alarm over a potential government bailout for the bank.
“The fear is that this will stymie startup activity, innovation, entrepreneurship for a bit longer than we would like. And that’s not good,” said Shyam Kumar, a professor of Management at Rensselaer Polytechnic Institute’s Lally School of Management.
Silicon Valley Bank was “viewed as a key artery for the Silicon Valley tech ecosystem and played an integral role in the surge of successful tech startups in the post doc.com bubble,” Wedbush analysts Dan Ives, Taz Koujalgi, John Katsingris and Steven Wahrhaftig said in a report.
The Treasury Department and Federal Reserve in a joint statement Sunday said that all depositors at Silicon Valley Bank will have access to their money beginning on March 13, and approved the FDIC’s resolution in a manager that “fully protects” all depositors.
The Wedbush analysts said that while the government action “backstops the SVB funds and takes uncertainty off the table, the impact from this past week will have major ripple impacts across the tech landscape and Silicon Valley for years to come in our opinion.”
We’ll have a full report breaking down the impacts at TheHill.com.