It was a tense weekend for the tech community, as many startup founders wondered how the collapse of Silicon Valley Bank on Friday would affect their ability to pay their employees, vendors and other operating expenses.
The Federal Deposit Insurance Corp., or FDIC, took control of Silicon Valley Bank on Friday, marking the second-largest bank failure in U.S. history.
The collapse of Silicon Valley Bank panicked customers at other small banks, which contributed to the fall of Signature Bank in New York. The FDIC took control of Signature Bank on Sunday.
While the FDIC typically only insures deposits up to $250,000, tech founders were able to breathe a sigh of relief Sunday night when the U.S. government announced that depositors will be able to access all of their funds through a newly created bridge bank starting Monday, March 13.
“Small businesses across the country that had deposit accounts at these banks can breathe easier knowing they’ll be able to pay their workers and pay their bills,” President Joe Biden said in a Monday morning news conference. “Their hard-working employees can breathe easier as well.”
Silicon Valley Bank and Signature Bank customers will be made whole through the FDIC’s Deposit Insurance Fund. Those losses will be funded by a special assessment on banks and not by taxpayers, according to a statement.
While tech founders can rest assured that they will get their deposits back, other tech companies, VC firms and government entities did act quickly over the weekend to offer stopgap funding for businesses affected by the collapse of Silicon Valley Bank and Signature Bank.
On Sunday, payroll and compliance startup Deel announced that it would offer up to $120 million of its own cash to Silicon Valley Bank customers affected by the bank’s collapse. The offer, which was developed in partnership with its investors Andreessen Horowitz and Y Combinator, was announced around the same time the government said depositors would be made whole.
A representative from Deel confirmed to Built In on Monday that it is still working with companies that have applied for funding assistance.
Fintech startup Mercury has also been a popular alternative for startups switching their funds from Silicon Valley Bank. Mercury CEO Immad Akhund wrote on Twitter that the company onboarded hundreds of former Silicon Valley Bank customers over the weekend. The company also launched a new product called Mercury Vault to provide up to $3 million in FDIC insurance by spreading a company’s funds across 12 partner banks, each of which provides up to $250,000 of FDIC insurance.
The Federal Reserve is also offering additional funding through a new Bank Term Funding Program, according to a statement released on Sunday evening. The new program will offer one-year loans to banks, credit unions and other eligible businesses. If needed and approved by the Treasury secretary, the Department of the Treasury will also make up to $25 billion available as a backstop to the Bank Term Funding Program.
