In the wake of the collapse of Silicon Valley Bank earlier this month, not all founders fled from the chaos.
SVB’s failure was caused in part by a run on the bank amid concerns about the bank’s financial situation. While some Boston founders pulled their funds from the bank, others kept all or a portion of their capital in the bank. Several of these founders told BostInno that they admired the work SVB did for the startup community and wanted to show their support.
Now, with news of the bank’s acquisition by First Citizens Bank, founders will need to decide whether to stay or go.
‘Not fleeing for cover’
The news broke early this morning that North Carolina-based First Citizens Bank had struck a deal to acquire Silicon Valley Bank over the weekend. This deal includes all the deposits and loans of Silicon Valley Bridge Bank created by the Federal Deposit Insurance Corp. Also included in the agreement was the purchase of SVB Private, a business formerly called Boston Private that SVB acquired in 2021.
Penelope Finnie, CEO of Somerville-based startup Egal, grew up in the South and was used to seeing First Citizens branches across the Carolinas and Georgia.
“Their community presence in the South is huge. In South Carolina, it feels like there’s more branches than there are towns,” Finnie said.
Based on their foothold in these local communities, Finnie is sure First Citizens has experience working with small businesses. The question she has is whether they have experience working with startups and can live up to the services offered by SVB.
The startup Finnie leads is putting free pads in bathroom stalls inside dispensers that resemble those used for toilet paper. Finnie was previously the chief creative officer for ask.com and started Bittersweet, a chain of chocolate cafes in the Bay Area.
Coming from California, she said every startup she knew used SVB. Egal banked with SVB and had just deposited more funding into its account on the Wednesday before SVB was shut down by the FDIC on Friday, March 10.
Finnie said there were several perks of working with SVB. First, it was mainly an online bank and offered great digital services. SVB also allowed her startup to send wires internationally without a charge and use remittance services to pay school nurses they worked with in Rwanda.
On Monday morning when SVB accounts were reopened, Finnie created an account with Chase and transferred some money out of SVB. But she kept $250,000 at the bridge bank.
“I did believe in supporting it and not fleeing for cover. It just feels like for the greater good, that’s the better thing to do,” Finnie said.
Finnie said she hopes First Citizens continues the services and infrastructure that SVB created and that depositors won’t notice any changes. For now, she plans to wait and see how things shake out before changing her banking setup again.
As of midday Monday, Finnie said she had not received any communications from First Citizens or Silicon Valley Bridge Bank about the acquisition.
Keep ‘SVB as it is’
Rahkeem Morris, the founder and CEO of HourWork, also had not received any official communications about the news. His startup kept all of its funds with SVB following the shutdown by the FDIC and, just prior to the shutdown, had signed a debt facility with the bank. Morris said he felt secure because the federal government said it would protect depositors at the bridge bank.
“SVB has been helpful more than just being a bank,” Morris said. He said that after pitching their team for venture debt, they connected him to at least three investors. “That’s just something I haven’t gotten from another bank before.”
He isn’t familiar with First Citizens or know any founders who have banked with them. But, he was pleased to see that First Citizens noted in its press release that it aims to continue serving the innovation community.
First Citizens also noted in the release that there would be “no immediate change to customers' current accounts, and they will be able to continue to access their accounts as they do today.”
Morris said he plans to stay with this banking situation “at least for now” and see how things change after a few months.
Moving forward, Morris wants to see First Citizens keep “SVB as it is,” at least in the short term.
“I think that over time they’ll likely want to integrate the bank more closely…If they were to be more patient with that, they can see how SVB operated, how it worked and how it may be different from their existing operations today,” Morris said.
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