What the failure of Silicon Valley Bank means for startups in Utah, according to a VC partner

A partner at Utah-based venture capital firm Kickstart said most of Utah’s venture capital backed companies have banks at SVB.

(Illustration by Christopher Cherrington | The Salt Lake Tribune)

Friday’s collapse of Silicon Valley Bank — the country’s 16th-biggest bank — has tech companies scrambling for answers ahead of Monday business, including many Utah-based startups.

Kat Kennedy serves as a General Partner at Kickstart, a Utah-based venture capital firm that invests in pre-seed and seed-stage companies. She said Kickstart has been monitoring the SVB situation since Thursday as they have a longstanding relationship with the bank.

“Companies in our portfolio have worked with them,” Kennedy said. “So when I say we have a relationship with them, it means Silicon Valley Bank has worked hand-in-hand with the venture and…innovation ecosystem here in Utah.”

About 50% of US venture-backed startups have worked with Silicon Valley, according to their website. Kennedy said that number likely extends to Utah’s venture capitalized companies, as SVB has often been one of the first lenders and an “incredible partner” for new businesses.

The bank had a branch in Cottonwood Heights to serve Utah businesses.

After news of SVB broke on Friday, Utah Gov. Spencer Cox tweeted, “We recognize the serious impact this is having on many Utah companies with significant assets at risk. We will urge regulators and federal partners to work quickly for stability, security and solutions.

The impact of the SVB’s failure will not be limited to the venture capital sector, Kennedy said.

“In America we should be able to have confidence in our banking system. Depositors should get well, and that’s part of the deal we’re making with the banking system here in the United States,” Kennedy said.

“So should everyone be concerned if a bank doesn’t recognize this relationship with depositors? I think that’s of great importance to everyone,” she continued. “This is a $200 billion bank … I think people will be affected, even if they’re not among the employees who aren’t sure what’s going to happen to their paycheck next week.”

Kickstart employees have been on the phone with company founders since the bank was seized by the Federal Deposit Insurance Corporation on Friday morning. The biggest concern for these companies is payroll on Monday.

“There’s a lot of misconception about who gets hurt if we don’t get the funds back — and who gets hurt or employees,” Kennedy said. “These are not rich, wealthy people who are being hurt by what happened at Silicon Valley Bank. The people who get hurt are the depositors.”

According to The Associated Press, Silicon Valley Bank had total assets of $209 billion at the time of its collapse. It was unclear how many of his deposits were above the $250,000 insurance limit – which depositors are expecting on Monday – but previous regulatory reports showed many accounts exceeded that amount.

However, the $250,000 insured by the FDIC is “not enough,” Kennedy said, with companies trying to figure out how to close the gap on their payroll until they are able to pull out all of their deposits. She hopes that the collapse of the bank will not lead to the collapse of companies that had at SVB Bank.

“Often [startups have] a young, unproven founder chasing an opportunity that hasn’t been proven — it’s innovative, it’s new,” Kennedy said. “Silicon Valley Bank took that risk, actively worked with and advised these founders, and that’s something that’s going to be very, very difficult to replace… So we’re going to have a vacuum that’s going to have to be filled over the long term as it goes.” about venture lending.”

https://www.sltrib.com/news/2023/03/12/what-silicon-valley-bank-failure/ What the failure of Silicon Valley Bank means for startups in Utah, according to a VC partner

Justin Scacco

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