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The Federal Deposit Insurance Corporation will “complete its resolution of Silicon Valley Bank in a manner that fully protects all depositors, both insured and uninsured,” the Federal Reserve Board announced Sunday afternoon as part of a broader plan to shore up the U.S. financial system following the bank’s sudden downfall.
The move is meant in part to reassure startup leaders in Silicon Valley, Seattle, and elsewhere across the country. Many of those tech leaders have spent the past four days scrambling for solutions after an extraordinary bank run, sparked by a loss of confidence in Silicon Valley Bank’s financial position, made it insolvent late last week.
“This is definitely a much needed relief,” said Kirby Winfield, founding general partner of Seattle VC firm Ascend.
An estimated 80% or more of venture-backed technology and life sciences companies in the Seattle area banked with Silicon Valley Bank, putting the region’s tech sector at disproportionate risk to the meltdown. Across the country, by comparison about 50% of companies in tech and life sciences banked with Silicon Valley Bank.
“I’m just relieved that folks will make payroll tomorrow and have no regrets about all the work and contingencies everyone put in place in case the Fed didn’t come through,” said Aviel Ginzburg, general partner at Seattle VC firm Founders’ Co-op.
In addition to promising to go beyond the normal FDIC insurance limits of $250,000 per depositor, the Federal Reserve said it would make additional funding available to other banks, attempting to contain the fallout from SVB’s failure. That move came as regulators closed Signature Bank, a financial institution heavily used by the cryptocurrency industry.
Grin Lord, founder of Seattle startup mpathic, said she and her finance chief were working nonstop since Thursday trying to figure out how to move the company’s cash out of its Silicon Valley Bank accounts.
“Crisis will be averted for us, though I imagine a lot folks are still impacted,” she said. “I’ll still be using the work we did to reduce burn and be lean — it’s a good exercise and a test of leadership.”
Lord credited her investors for helping provide guidance. “The best thing they did was to tell me immediately as soon as they were withdrawing funds,” she said.
“This is a moment for founders to evaluate their partners,” she added. “And for investors to see how their founders communicate and prioritize their teams in a crisis.”
Developing story, more to come.
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