Silicon Valley Bank’s collapse disrupts tech sector

Tech sector suffered deep disruption caused by the demise of Silicon Valley Bank (SVB), the sector’s most enabling financial institution.

“They understood startups, they understood venture capital” Leah Ellis, an entrepreneur and co-founder of Sublime Systems, stated. “They were woven into the fabric of the startup community,” he added.

SVB showed more appreciation of unorthodox business ideas. This is especially evident in comparison with other, more established financial institutions.

Other larger institutions also have not yet acquired a deep understanding of technology similar to what SVB had.

Biden’s administration has intervened in order to guarantee the bank’s deposits above the insured limit. However, the crisis made many tech start-ups ponder their financial arrangements.

Stefan Kalb, CEO of Seattle startup Shelf Engine said to AP he opened an account at JPMorgan Chase, the 16th largest in the U.S.

Beside resorting to banks with larger deposits, entrepreneurs are also starting to realize it is better to have a diversification plan when it comes to bank accounts.

However, fears are still looming that risky ideas, usually considered a defining characteristic of the tech sector, would have a harder time finding finance without SVB.

Silicon Valley Bank was founded in 1983. The bank disclosed a loss of $1.8 billion on bonds that were purchased before interest rates spiked last year.

This has raised concerns that was more fueled by the sector itself spreading warnings about the issue.

Bob Ackerman, founder and managing director of venture funder Allegis Cyber Capital, traced the crisis back to what he called “a self-inflicted wound by a circular firing squad” in his statements to AP.