Gary Tan, President and CEO of Y Combinator, recently stated that the Silicon Valley bank collapse is an “extinction-level event” for tech startups. Y Combinator has helped launch over 4,000 tech companies including Airbnb, DoorDash, and Stripe.
market surveillance reports That the failure of Silicon Valley Bank (SVB) has sent shock waves through the tech startup community, with fears that it could set innovation back a decade. Gary Tan, CEO of startup accelerator Y Combinator, called it an “extinction-level event” for startups, warning that the loss of these small businesses could have a huge impact on the economy.
This is an ‘extinction-level event’ for startups and will set startups and innovation back 10 years or more,” Tan said. Tomorrow, if we don’t find a solution.”
SVB’s downfall is the biggest banking failure since the collapse of Washington Mutual in 2008, and its closure has left thousands of startups in a precarious position. By the end of 2022, the bank had 13 operating locations in California and Massachusetts, total assets of $209 billion, and deposits of $175.4 billion. With many startups making SVB their only bank, a $250,000 FDIC deposit insurance won’t suffice.
John Carney, economics editor at Breitbart News, writes:
The Silicon Valley bank collapse was triggered by a massive bank run, as customers began withdrawing $42 billion this week.
The bank was placed into federal deposit insurance receivership on Friday after the California Department of Financial Protection and Innovation (DFPI) determined that the bank had become insolvent.
Before the bank run, the bank was “in sound financial shape,” according to the DFPI. The customers withdrew $42 billion, leaving the bank with a negative cash balance of $958 million.
Here is a summary of what happened from DFPI The order to seize the bank:
On March 8, 2023, the bank announced a loss of approximately $1.8 billion from the sale of investments (US Treasurys and mortgage-backed securities). On March 8, 2023, the bank’s holding company announced that it is conducting a capital increase. Although the bank was in good financial condition before March 9, 2023, investors and depositors reacted by starting to withdraw $42 billion in deposits from the bank on March 9, 2023, causing a run on the bank. As of the business close on March 9, the bank had a negative cash balance of approximately $958 million. Despite attempts by the bank, with the help of regulators, to divert collateral from various sources, the bank has not fulfilled its monetary letter with the Fed. The rapid withdrawal of deposits had caused the Bank to be unable to pay its liabilities when due, and the Bank was now insolvent.
Prior to its collapse, Silicon Valley Bank was the 16th largest bank by assets in US Federal Reserve data Offers The bank had assets of $209 billion as of December 31, 2022.
Tan has been vocal in his requests for steps to be taken to help these startups. He has pleaded with the Federal Deposit Insurance Corporation (FDIC) to end the receivership as soon as possible and issued a stern warning that many startups will be forced to close unless immediate action is taken.
“The single most important thing the FDIC and the United States Government can do right now is make the receivership as short as possible,” Tan wrote on Twitter. “There are thousands of US startups that have banked in SVB, often as the sole bank. $250,000 per account won’t last long.”
Tan warned of the detrimental impact of these “thousands of small businesses” that are “big drivers of GDP,” saying, “They will never get a chance to be like that in the future, and this will come at the expense of thousands, if not tens of thousands of jobs, In the future “.
“The financial world doesn’t have the power to bail these companies out, for example, we’re just going to throw startup innovation wholesale into America if we let these companies die in the next few weeks, which is really a matter of next week.”
The FDIC assures customers that their deposits are safe and that the bank will open again on Monday. However, many startups are still worried about how this will affect their companies. Tan reports that companies have contacted him to inquire about how they are able to pay their employees given that all of their funds are in SVB accounts.
“What the FDIC really needs to do is take these people into account,” Tan said. “These are the little guys who, if we hurt them, it will hurt us all. This is a national security issue. … This will spill over into all sectors of the economy.”
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Lucas Nolan is a reporter for Breitbart News covering issues of free speech and internet censorship. Follow him on Twitter @employee
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