As a meltdown unfolds at Silicon Valley Bank, startup founders who bank with the storied institution are calling for calm.
"The idea of being concerned about on-deposit at SVB is the most paranoid and delusional way to think about it," said Scott Painter, co-founder and CEO of electric car subscription startup Autonomy, said. "They are the go-to bank for Silicon Valley. It's not as if there is some fatal flaw in their operations or what they do."
His display of support comes alongside a disastrous day for SVB, a go-to bank for the tech industry that saw its share price plummet more than 60% Thursday following an announcement that it completed a $21 billion firesale of its bond portfolio, which led to a loss of $1.8 billion. Because of this loss, SVB said it would raise about $2 billion from investors by selling stock and issuing related securities. This caused some VCs and founders to worry about the financial strength of their banking institution.
This caused some VCs and founders to worry about the financial strength of their banking institution.
SVB lends money to startups and keeps their cash deposits, so they can pay staff and other expenses. If startups are worried the bank can't give them all their money back from their bank accounts, then they might pull their accounts. In essence, a bank run -- Silicon Valley style.
"Bored VCs"
By Thursday, notable VC firms such as Founders Fund, Y Combinator, and Redbeard all said they were strongly advising their portfolio companies to pull their funds out of SVB following a frenzy on Twitter.
Some founders, however, say they're not yet concerned.
"As long as I can remember, SVB has been a super big prominent in startups," said Loop co-founder and CEO John Henry. "They're super founder friendly, and you could argue that they've found themselves in a vulnerable position. That's why we have a collective responsibility to be vocal about SVB to dissuade any fears or a self-fulfilling prophecy."
Henry added that he's fielded calls today from worried investors, but after reviewing SVB's financial position with his operating team, he was confident in his decision to stick with the bank.
On Twitter, someone else blamed SVB's problems on bored VCs.
"There is a bank run going on at SVB purely because junior VCs have nothing better to do than text their founders 'hey did you see what happened with SVB's stock? Might want to pull your cash out in case there's a run on the bank,'" wrote entrepreneur Evan Moore.
Siqi Chen, founder of fintech startup Runway, told Insider that while his startup doesn't bank with SVB, he thinks that many concerns posted on social media are overblown — although he appreciates the tough spot some founders right now are in.
"SVB seems to be fine, but at the same time, there's this feeling around the founder community that if there's even a .1% chance that something could happen, it can be anxiety inducing," he said. "Just look at FTX, Crypto, and Silvergate."
"Fanning the flames of a bank run is a bad look for everybody and i don't want to be a contributor," Chen also Tweeted.
'I'm not the least bit worried'
Few VCs have come out in support of SVB, but Upfront VC's Mark Suster urged others in the venture community to speak out and quell the panic.
"I believe the biggest risk to startups AND VCs (and to SVB) would be a mass panic," he wrote on Twitter. "Classic 'runs on the bank' hurt our entire system. People are making public jokes about this. It's not a joke, this is serious stuff. Please treat it as such."
Painter, the Autonomy founder, says he remains unphased.
"Anyone who's saying you should only have a limited amount with them, it's unwise. It's stupid. Why would you create that kind of panic?" he said. "I'm not the least bit worried. I'm going to buy their stock today."
