Colorado’s tech companies relied heavily on Silicon Valley Bank. The federal government’s decision avoided a wider financial crisis but regulators were unable to find another bank willing to take on SVB’s loan portfolio, leaving many borrowers scrambling.
Colorado’s technology companies relied heavily on Silicon Valley Bank, and the federal government’s decision over the weekend to guarantee uninsured deposits after a takeover on Friday avoided a wider financial crisis by allowing the bank’s customers to access their money to meet payroll and other expenses.
The most pressing worry initially was about paying bills after losing access to uninsured deposits. Every client calling held more than the $250,000 that the Federal Deposit Insurance Corp. covers against loss, Singer said. Some firms were holding tens of millions of dollars extended to them by private equity investors. About 87% of the $175.4 billion in deposits at SVB were not insured, leaving customers jittery about any signs of trouble.
Denver-based Soona, which runs a platform to create content through virtual photo and video shots, had millions of dollars tied up with SVB when an investor shared word on Thursday that the bank was in trouble. Soona management began planning an escape, but things moved too quickly. How welcoming other more traditional banks will be to those escaping SVB, which had a reputation for understanding and working with startups and emerging technology companies, remains to be seen. Some banks are stepping forward to speed up the loan process, but transitioning loans will take time.
“I think a big loss for the community is what happens with SVB. We all used them, we relied on them. Their team here was fantastic. They were super helpful and key members of the startup ecosystem and we’re all going to have to try to figure out how do we replace them if SVB is not acquired,” he said.
“SVB is one cancerous cell in your body and it is going to spread. I don’t think people quite understand what effect the spread will have and the vastness of it. There is serious contagion here,” warned James King, who is launching Contrarian RE Fund 1, a distressed real estate fund based in Colorado.
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