Since Thursday afternoon, Milwaukee attorney Daniel Gawronski and his team at Venture Best have been fielding calls from clients concerned about Silicon Valley Bank (SVB).
The bank, which worked with many growing startups and technology companies, swiftly shut down Friday when federal regulators seized control of the institution's assets less than two days after SVB officials announced it had lost nearly $2 billion. That left startups — including some of Gawronski's clients — scrambling to access their funds.
“It’s been a crazy few days,” said Gawronski, a partner with Venture Best, the startup arm of the Michael Best & Friedrich LLP law firm. He works with technology companies primarily based in Wisconsin and the Midwest, but also nationwide.
Although Wisconsin's startups were generally less impacted by SVB's collapse compared with coastal startups, some local companies banked with SVB and others are affected by the widespread uncertainty the bank's rapid failure caused.
Following the collapse of SVB, New York's tech-focused Signature Bank abruptly closed Sunday, fueling high-stakes challenges for the U.S. banking industry. The federal government on Sunday said it will cover all deposits at both banks, going above and beyond the $250,000 guaranteed by law under the FDIC Deposit Insurance Program
Some venture-backed companies in Wisconsin had deposits with SVB or Signature Bank, and there have been some venture-debt deals in Wisconsin, the Wisconsin Technology Council said in a Q&A posted on its website Sunday. A survey of the major funds and angel networks in Wisconsin did not uncover a large number in either category, the organization said.
A handful of Venture Best clients banked with SVB, Gawronski said. The companies are generally at the Series A stage or later in terms of their business maturity, he said.
In at least two cases, a Venture Best client was trying to close a merger or acquisition with another company that banked with SVB, Gawronski said. Those deals stalled due to the bank's collapse.
"SVB was kind of the bedrock bank of the startup ecosystem," Gawronski said. "Hopefully it's a case of mismanagement and not an overall economic issue."
Jay Creagh, a Milwaukee-based startup attorney at Godfrey & Kahn, estimated that around 5%-10% of his Wisconsin clients worked with SVB. Many of those companies didn't have another business bank account set up, he said, leaving them scrambling to open new accounts so they could move their money.
"Friday was pretty scary," Creagh said. "I think there was a lot of unease because venture-backed companies aren’t in a position where they could easily raise money. They were sitting there wondering, 'How are we going to make payroll next week?'"
In some cases, Creagh's clients that banked at SVB had recently closed a fundraising round and other clients had opened new accounts at SVB just weeks ago, he said.
SVB's collapse had implications for local technology companies — even those that didn't work with the bank.
Jesse DePinto, the co-founder and CEO of the Milwaukee short-term rental startup Frontdesk, said he was glued to the news throughout the weekend and made sure to promptly tell his employees and investors that Frontdesk does not bank with SVB.
"This is a lesson we learned in the pandemic," DePinto said. "In a time of crisis, err on the side of over-communication."
As a result of the SVB collapse and the ensuing fallout, it may be harder for early-stage technology firms to access venture debt loans, which are often key to bridging a company’s operations between venture capital equity rounds, the Wisconsin Technology Council said.
"Venture capital was already hard to raise in 2023 and it won’t get any easier," the tech council's post said.
