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Silicon Valley Bank Closure Impacts Hundreds of Startups and VCs

The closure of the Silicon Valley Bank had a major impact on startups and venture capital firms.

Silicon Valley Bank Closure Impacts Hundreds of Startups and VCs

Source: Pixabay.com

The reason for the significant impact of the incident on startups and venture capital companies is that they kept billions of dollars in a financial institution, the closure of which became known at the end of last week. The bank came under the management of the Federal Deposit Insurance Corporation (FDIC).

Currently, clients of a financial institution cannot log into their accounts and have difficulty accessing funds. Consumers are also interested in the possibility of obtaining loans.

The FDIC has stated that insured deposits will be available. But this will not solve the problem in full or significantly, since most of the funds in the Silicon Valley Bank, which was closely associated with the technology industry, are not insured.

Some clients of the financial institution transferred their funds to other banks the day before Silicon Valley Bank closed, but it is still unknown how these operations went.

One startup, whose name is not reported, warned employees that operational failures will be observed over the next few weeks. Another company, about which there is also no detailed information, the day before the bank closed, tried and failed to withdraw $ 50 million. Some startups are trying to turn their claims for uninsured funds into cash or collateral for loans.

Also, the collapse of the bank can have long-term consequences. According to some experts, it will be difficult for technology startups to find new partners in the banking sector who will establish cooperation with them without excessive caution and various costs. Companies are also concerned about the prospects of attracting additional financing since many investors kept their money in the Silicon Valley bank.

As we have reported earlier, Regulators Close Crypto-Focused Signature Bank.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.