The failure of Silicon Valley Bank — the second biggest bank collapse in history — has sent shockwaves through the Tampa Bay startup scene.
The bank, a longtime champion and often the sole lifeline for startups, was taken over by regulators on Friday after its stock crashed nearly 70 percent following rumors of a sale.
Silicon Valley Bank had far-reaching ties in Tampa Bay despite its California headquarters. In mid-February, it sponsored the pitch competition at Tampa's Synapse Summit, awarding $150,000 to New York-based EVQLV. The bank also provided PPP loans to 10 Tampa Bay businesses during the Covid-19 pandemic, including fast-growing companies HOMEE, Qure4U and Venuetize.
"I don't think this is an '08, '09 situation where the banks default; the financial systems are in a better position from a regulations standpoint," said Saxon Baum, partner and lead of investor relations at Tampa-based Florida Funders. "But from our world of startups and VCs, this is something we will look back in 20 years, saying, 'Where were you?' We're going to remember this time."
The majority of Tampa Bay venture capitalists approached for this story declined to be interviewed because the bank's situation is rapidly evolving. Regulators seized the bank on Friday; on Monday, they expanded their limit on deposit insurance, allowing SVB customers to access their funds.
Baum said he and the Florida Funders team began reaching out to their portfolio companies as news of the bank failure broke. The good news: Despite the bank's ties to Florida, Baum found regional companies were not nearly as impacted as West Coast companies.
"We’ve been monitoring, and [if companies had been exposed] would come up with solutions because our goal was to help — we’re not successful unless they are," he said. "But if you look at the exposure, the Northeast and Southeast have a minority share."
In the wake of the bank collapse, startups could struggle to find loans.
"[Silicon Valley Bank] was the core player in that line of credit or loaning," Baum said. "So pulling that out, there are fewer players and it’ll be harder to get venture debt."
Founders may also be hesitant to work with smaller banks.
"It's probably in the back of a founders head of, 'Yes, we trust the government,' but it's also, 'Can I keep my money at JP Morgan versus a smaller bank?'" Baum said. "I don't know the answer, but it’s a question they're going to ask. It's not something you think you have to do, doing due diligence on a bank. But it does fall a bit more on the hands of the company."
While the larger ripple effect of SVB's closure remains to be seen, there is an opportunity for other banks to fill the role of startup savior. Baum pointed to JPMorgan Chase & Co. as a likely candidate — the bank launched a platform in October dubbed "Capital Connect" that connects private companies and investors.
Chase has also invested in startups locally. In 2020, it gave Tampa-based organizations Embarc Collective and Tampa Bay Wave a two-year, $500,000 grant to create a women-focused tech program called TechWomen Rising accelerator.
"They saw the success of SVB and they're probably the best suitor," Baum said of Chase.
He added institutions like PNC and First Republic Bank, as well as fintech companies like Brex and Ramp, may stand to benefit.
"A lot of people are trying to push to be the next big player," Baum said.
