Startups Are Worried About Paying Employees After SVB Collapse
Yahoo! Finance: Top Stories / 2023-03-10 22:2641


(Bloomberg) -- Startup founders are beginning to worry about whether they'll be able to keep paying employees following the failure of Silicon Valley Bank.

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Payroll service provider Rippling notified customers on Friday that some payroll processing had stalled because SVB helped process its payments. The company, a startup itself, switched to JPMorgan Chase, but not soon enough: Paychecks were already "in flight" with SVB and have yet to be paid out — and the firm is still trying to understand what the bank's collapse on Friday will mean for them, Rippling Chief Executive Officer Parker Conrad said in a Twitter post.

Startup founder Brad Hargreaves said some firms may not be able to make payroll next week. And because boards are incredibly sensitive to employing workers they can't pay, he said, "Expect mass layoffs later today, Monday at latest."

Sarika Bajaj, the CEO of early-stage startup Refiberd, said she had been a customer of Silicon Valley Bank for three years and kept most of the company's funds there. Bajaj, who was at the Sand Hill Road branch of SVB in California on Friday, tried to make withdrawals but couldn't and is growing concerned about payroll for her and her two team members.

"I'm sure there are lots of people here with lots and lots of employees," she said. "It's not our reality, but I know it's going to be a lot of people's realities."

More than half of tech companies "keep the lion's share of their cash at SVB," said Greg Martin, founding partner of the investment firm Liquid Stock. "They all need to make payroll early next week."

Martin said he believes the bank is healthier than people think. But the worst-case scenario, he said, is "tens of thousands of people" don't get paid next week.

At least one startup was planning to do layoffs today, but the Silicon Valley Bank situation forestalled those plans because the business, which banked with SVB, no longer had the capital to pay severance, according to a person with knowledge of the matter.

Conversely, other startups were considering doing layoffs because of the SVB situation, because it's illegal to have employees without paying them, this person said. Furloughing was also under consideration, as a potential way to bring employees back on the payroll when funds are received. Startups are frantically discussing their options with lawyers, the person added.

(Updates with detail about a startup delaying layoffs in final paragraph.)

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SVB Meltdown Brings Another Blow to Cash-Starved Biotech Industry
Bloomberg / 2023-03-10 22:497


Biotech companies are racing to assess the damage from the failure at SVB Financial Group, the latest issue facing many of the startups in search of cash. 

SVB, which collapsed Friday after a run on assets, plays a large role in financing early-stage life sciences and health-care companies. Venture-backed health companies account for 12% of SVB's $173 billion of deposits and 36% of $168 billion in funds held off balance sheets as of year-end.

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CEO of failed Silicon Valley Bank no longer a director at SF Fed
por Reuters

Investing.com: Stock Market News / 2023-03-10 22:42



© Reuters. FILE PHOTO: Greg Becker, President and CEO at SVB speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2022. REUTERS/Mike Blake
By Michael S. Derby

(Reuters) -The chief executive officer of failed Silicon Valley Bank, Greg Becker, is no longer on the board of directors at the Federal Reserve Bank of San Francisco.

Becker's departure was effective on Friday, a spokesperson for the Federal Reserve said. Earlier on Friday, Silicon Valley Bank (O:) was closed by regulators.

The spokesperson declined to say how Becker exited the San Francisco Fed board. Becker served as a Class A director at the San Francisco Fed, one of three finance executives representing member banks in the San Francisco Fed district.

Each regional bank is overseen by boards comprised of private citizens. In addition to having three directors to represent banks, there are six other directors who present a mix of local businesses and community interests. Three of those directors are selected by the Fed's Board of Governors in Washington, while the remainder are selected in a local process.

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Silicon Valley Francisco Fed no longer

CEO leaves San features Silicon Valley

Francisco Fed Bank CEO on website

board

The 12 regional Federal Reserve banks are quasi-private institutions overseen by the Fed in Washington. Their respective boards watch over the banks directly and provide advice on governance as well as local economic intelligence.

Most importantly, these boards also lead the process to select new presidents when there are vacancies, although directors from firms regulated by the Fed are not allowed to participate in that process.

The directors of the Fed banks have been in the spotlight in recent years as the central bank has faced criticism that bank directors lacked racial and gender diversity and were too weighted towards the business and banking community. The Fed has been working on expanding who serves in these roles.

The boards have also created issues for the Fed in years past. The New York Fed's board was heavily dominated by bankers at the onset of the global financial crisis and even included the leader of Lehman Brothers, a firm whose failure in the fall of 2008 is widely seen as kicking off the most acute phase of the financial crisis.

In 2019, the Chicago Fed's then board chair resigned her term early as her employer faced legal trouble.

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After Silicon Valley Bank's shutdown, uninsured depositors face tense wait
por Reuters

Investing.com: Stock Market News / 2023-03-10 23:111


© Reuters. People gather outside of the Silicon Valley Bank (SVB) headquarters in Santa Clara, California, U.S. March 10, 2023. REUTERS/Nathan Frandino
By Pete Schroeder

WASHINGTON (Reuters) - Silicon Valley Bank's high level of uninsured deposits helped kick off the run that led to the bank's closing down, and now any of those depositors will need to hold their breath to see if bank regulators can recover enough to make them whole.

Friday's announcement by the Federal Deposit Insurance Corporation that the bank was closed came with few specifics on what will happen to bank customers who held more than the $250,000 per account that is guaranteed by the government.

In prior large bank failures like IndyMac and Washington Mutual, the FDIC found other firms to take on the assets and keep deposits intact. But failing that, uninsured depositors will be left with a portion of whatever funds the FDIC can raise selling off the bank's assets.

SVB Financial Group's Silicon Valley Bank had a relatively high amount of uninsured deposits as it courted tech workers and venture capital firms. The FDIC said on Friday the amount of uninsured deposits at the bank was "undetermined," likely complicated by the rush of bank customers to remove uninsured funds. But data submitted to the FDIC by the bank at the end of 2022 showed that 89% of its $175 billion in deposits were uninsured.

All insured deposits will be accessible in full no later than Monday morning, but the FDIC said uninsured depositors will get a "receivership certificate," and that future dividend payments "may be made" to pay off uninsured funds as the bank's assets are sold. Customers with uninsured deposits were told to call the FDIC.

An SVB spokeswoman referred questions to the FDIC. An FDIC spokeswoman did not respond to a request for comment.

Regulatory experts say account holders with uninsured funds are not typically individuals. Usually, accounts with such high funds are companies that need cash on hand for payroll and other expenses. But Silicon Valley Bank's relatively well-off clientele could be the exception, and the push for full repayment was already coming from some corners.

"We must make sure all deposits exceeding the FDIC $250k limit are honored," tweeted U.S. Representative Eric Swalwell, a California Democrat. "Banking is about confidence. If depositors lose confidence on the safety of their deposits over 250k then we are in trouble."

Beyond selling off the assets piecemeal, another possible move by the FDIC would be to find another firm to take on all or a portion of the assets. This move is typically preferred by the regulator as a smoother process that ensures depositors are minimally disrupted and usually kept whole. But that process can be lengthy, leaving uninsured depositors in the dark.

"This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor."

"The FDIC is likely negotiating a similar arrangement as we speak, with the result that virtually all assets and liabilities of Silicon Valley Bank will be transferred to the assuming bank in a short period of time."

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