The first hint of trouble at Silicon Valley Bank came Thursday. That’s when the founder of a New Jersey tech company (who is asking to remain anonymous) got a text from a fellow founder saying his company was pulling its money from SVB.
The New Jersey founder wasn’t worried.
And he wasn’t worried when a group text among a dozen or so founders and venture capital folks indicated others were pulling their money, too.
“Some of us were like, ‘We’re running companies, we don’t have time to move money,’” he recalled. “I texted: ‘It’s fine. It’s SVB. It’s not going to fall.’
“I literally have a text saying that.”
Early Friday morning, he realized he was wrong. He realized the more than $1 million he had in his account was in jeopardy.
He reached out to Provident Bank — with which he had a relationship with from a previous startup — and stunningly was able to open an account within an hour. Before the bank even officially opened.
“I can’t say enough about Provident Bank,” he said. “They were so professional. They understood the situation and quickly came to my rescue. I felt like a moron, because I had chosen to use SVB with this company, but that didn’t matter to them. They were there when I needed them.”
With a new bank account created, the founder put in a wire request first thing Friday morning to move the company’s money to its new Provident account. It never happened.
“I was hitting refresh every five minutes, just hoping and praying that it would say, ‘Confirmed,’” he said. “But I knew it was not going to happen.”
It was just part of the craziest day for him and so many other founders in New Jersey and across the country.
“I can begin to describe what Friday was like,” he said. “I’ve never been on the phone for 12 straight hours. I’ve never received hundreds of texts from other founders. We were all searching for answers.
“Someone said, ‘This is 2008 for the venture world.’ I think that’s 100% true. I can’t begin to describe the doomsday feeling that everyone had.”
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It’s all relative, but the founder also said he felt fortunate as Friday moved into the weekend — and that he felt this way after he and every other member of the senior staff had turned their salaries down to zero.
“We wanted to slow down our burn rate so we could make payroll,” he said.
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The pluses: He had a new bank account. He had a fresh infusion of cash from an investor. His payroll wasn’t due for a week. And it was only $1 million that he couldn’t access.
“Another founder that I know well had more than $25 million in SVB,” he said. “Another founder had to have an investor wire them $750,000 on Friday just to make payroll.”
Then, there’s this: He was in New Jersey, which was actively working to find solutions.
“I have to give full credit to the Governor’s Office and the (Economic Development Authority),” he said. “I’ll admit, I’ve been critical of them in the past, but, in this instance, they were on it from the beginning. Other than maybe California, I don’t think there was another state that was as active.”
He said he knows this from talking to other founders.
“Other states weren’t doing anything,” he said. “They were just watching. New Jersey was active — and I have to give them full credit for that.
“They only reason I wasn’t pulling my hair out all weekend is because of Provident Bank and the Governor’s Office.”
By Sunday afternoon, the governor and the EDA outlined three programs that would help founders have the funds they needed to cover their costs.
By Sunday night, the Treasury Department, Federal Reserve and Federal Deposit Insurance Co. announced that all deposits in SVB would be guaranteed — not just up to the standard $250,000 mark, as many feared all weekend.
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The founder said the episode taught him many important lessons — and not all of them were about banking.
“The biggest lesson I learned is to not follow the herd mentality,” he said.
He founded this company in 2022 — and felt almost required to use SVB as his bank.
“If you were in Silicon Valley six months ago and you didn’t use SVB, you were considered weird or abnormal,” he said.
He said he learned a lesson in diversification, too.
While it remains to be seen if the feds raise the FDIC’s $250,000 guarantee insured limit — an amount that was established nearly 100 years ago — this founder said he’s not going to take any chances.
The company will open additional accounts — even if that will create some accounting headaches. After this weekend, the company is happy to take them on.
“We know that big companies would diversify their accounts, but we didn’t think we were big enough for that to matter,” he said. “Now, we know we are.”
Of course, that’s when the company finally gets its money.
It put in for a wire transfer this morning — and hopes to have its funds in the Provident account by the end of the day.
And, while he understands that mad rush to move money may mean his request isn’t handled for another day, he has confidence that it will.
He’s also confident that he will never make the same mistake again.
“When will I feel completely confident again — as confident as I felt at the beginning of last week?” he asked, and then answered. “Not until I have all my money and it’s in as many accounts as it needs to be to be under $250,000.
“Only then will I have 100% confidence again.”
