When news started to flood in last Thursday and Friday that Santa Clara, California-based Silicon Valley Bank (NYSE: SIVB) was at risk of collapse, Chris Ziomek, CEO of Build with Robots, wasn't too worried.
He said he's seen this before.
"Through the local investor community there was word that either the federal government or another bank would buy them out over the weekend," he said. "That's exactly what happened, [the federal government stepped in]."
There was a bit of initial concern for the Albuquerque-based disinfection robotics company. The startup had an operating account through Silicon Valley Bank, with more than the Federal Deposit Insurance Corporation's $250,000 insured maximum amount, Ziomek said.
That meant, as of the end of the day on Friday after regulators shut down the bank that morning, the Albuquerque company wouldn't have access to all of its money.
But when federal authorities stepped in on Sunday evening to insure all Silicon Valley Bank deposits,some concerns shared by Build with Robots and other startups were eased.
The bigger picture is where Ziomek is more worried.
"How many businesses are struggling and what does that forecast for the future in terms of the economic impacts?" he told Albuquerque Business First. "The good news for us is that we have a really hot new product that is scaling. But I do worry about the larger macroeconomic factors at influence here."
Regulators declared Silicon Valley Bank insolvent Friday morning and put it into receivership with the FDIC after a sell-off of its parent company's stock on Thursday. Investors dumped the stock after CEO Greg Becker announced the bank lost $2 billion selling assets to shore up its balance sheet and planned to sell $2.25 billion in stock. The bank had over $209 billion in total assets as of December.
A massive bank run followed, with investors and depositors taking out $42 billion on Thursday.
Startups like Build with Robots and other companies in New Mexico may be better positioned to deal with bigger-picture economic trends, said Drew Tulchin, the president of New Mexico Angels, a statewide nonprofit angel membership organization.
"New Mexico is lucky to have a number of really strong startup companies," Tulchin said. "Because we're a little out of the way, away from the coasts, that's actually helped us. It's buffered us a bit.
"The impact of Silicon Valley Bank is minimized and doesn't slow down the great startups here."
Dave Blivin, managing director of the Santa Fe-based Cottonwood Technology Fund, sees a similar story. The state is largely isolated from big coastal institutions, he said.
"In general, startups in New Mexico probably have a harder time establishing relationships with [an institution] like Silicon Valley Bank, because they go after the bigger deals and the bigger funds," Blivin said.
For those New Mexico companies that had put money into Silicon Valley Bank, he said there was some initial concern. But now that all deposits have been insured, he's seen that concern die down.
"I think the natural reaction to this is to be more conservative and just take the safer route in the future," Blivin added.
Besides Build with Robots, other New Mexico startups had put money into the shuttered California bank. One of those was BabyQuip, a startup that pairs traveling parents with providers of baby gear, a little like Airbnb.
Fran Maier, who lives in Santa Fe and launched the baby gear company in 2016, said her company had "a significant amount" of money at Silicon Valley Bank. But because she had moved some of the company's money into other places recently, she wasn't worried about having limited access to cash to be able to make payroll or pay other bills, she told Business First.
Maier, an early founder of Match.com, worked at companies around Silicon Valley and the California Bay Area for about 40 years. She said that before its collapse, Silicon Valley Bank was a "good bank."
"There was a reason why so many startups went to them," Maier said. "They did offer a specialization in startup banking.
"I just get a sense that this didn't have to happen."
Another local company that did business with Silicon Valley Bank was UbiQD, a Los Alamos-based tech startup. Hunter McDaniel, who founded the company in 2014, said his company had primarily banked at Silicon Valley Bank.
McDaniel moved to the California bank after investors encouraged his company to establish an account there. The bank's focus on small companies and support for clean tech and climate tech ventures made the bank a good fit for UbiQD, he said.
While McDaniel said the bank's failure has caused some disruptions among startup founders and venture capitalists, he's not too worried.
"If anyone is good at dealing with stuff like this, it's startup founders," McDaniel said.
For companies like Build with Robots, BabyQuip and UbiQD, Silicon Valley Bank's failure could hold some lessons, Tulchin from New Mexico Angels said.
"The benefit of a scare like this is it makes us pay attention to what should be sound fundamental financial that we're doing anyway," Tulchin said. "So, it's a great wakeup call."
