The news: The collapse and closing of Silicon Valley Bank over the weekend sent shockwaves through the technology sector, per The New York Times.
Panic in the valley: Hundreds of startups faced an “extinction-level” event with a cash crunch and payroll crisis when SVB shut its doors after a bank run late last week, per Insider.
The bank was a vital facilitator of the startup economy for decades, lending money and serving as a partner to tech startups. The recent economic downturn resulted in startups burning through cash and SVB announcing a loss of $1.8 billion.
Other banks in danger: The collapse underscores wider problems with the banking system.
A symptom of a bigger problem: SVB’s plight could be indicative of the frailty of the US banking system and the volatility surrounding venture capital and startups in the technology and technology-adjacent industries.
Investors are shaken and wary about the potential for a cascade of bank failures.
What this means for the tech sector: Startups and VCs could diversify their deposits and investments across a range of banking institutions. Companies like Etsy have already shifted to alternative providers.
Despite its failure last week, SVB was considered a vital cog in the innovation ecosystem, and its loss will have a net effect on the technology sector for years to come.
This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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