Closed of her three accounts with Silicon Valley bank failurecookbook author Anna Fosino spent the weekend in a state of high anxiety, uncertain about the future of her sauces and seasonings company.
“I spent most of my Friday afternoon writing all our creditors and saying, ‘Hey, I know we owe you money now, but I hope it all works out over the weekend,’” she said. “If it doesn’t, please have mercy on us.”
First thing on Monday morning, Vocino was able to successfully log into the Silicon Valley Bank’s website and begin the process of closing her accounts. She is moving her money into the National City Bank.
“I would feel more comfortable somewhere else,” said one Solvang resident.
Many other small business owners felt the same after Federal Deposit Insurance Corp. He seized the Bank of Santa Clara, California on Friday, It was followed by state regulators’ takeover of New York’s Signature Bank on Sunday.
Monday has become a day of massive money moves and account closures after what one winemaker called a “crisis cleanse” over the weekend, with account holders panicking that they won’t be able to access their cash easily or quickly. Customers logged on to the Silicon Valley bank’s website en masse while others rushed to the branch sites of other weak financial institutions.
The financial stampede came though President Biden’s reassurances, Who told Americans that the moves of the US Treasury, the Federal Reserve and the FDIC would ensure “that the banking system is secure. Your deposits will be there when you need them.”
“I thought my business was done, and I was pissed,” said Anthony Combs, CEO of Santa Monica lingerie company Splendies. He described the past 48 hours as “an absolute mess” and said he had sent 80% of his company’s money from Silicon Valley Bank.
“This wasn’t a stupid investment. This wasn’t bad planning – this was the company’s money in a bank where it’s supposed to be safe.
Before Combs knew if the transfer had been made on Monday, he pooled his savings, prepared to use them to meet the payroll of his 13 employees, and reached out to the vendors, who told him payments due within the next two weeks might have been spilled over into the next two months.
Many startup founders have spent the weekend racing to figure out ways to make ends meet for their business.
Lauren Wang, who runs sustainable period products company Flex, was denied her company’s funds at a Silicon Valley bank on Friday. The next day, she drove to Chase Bank in Calabasas to open a business account and tied half of her family’s liquid savings to it to make payrolls for Flex’s 30 employees by Monday.
Wang said the order was to “take action first to protect our employees and find out later”. “We had no idea what would happen to the bank.”
For people who used Silicon Valley Bank as their main source of banking services, the crash was a lesson in diversification. King Alandy Dy, founder of San Francisco-based AI logistics company Expedock, spent Friday waiting in line at Chase and Wells Fargo locations in Piedmont to create new accounts — along with several other startup owners doing the same.
On Monday, he logged into a Silicon Valley bank and sent his money. “I’m just trying to get a good spread,” he said of his new banking strategy.
Tegan Passalacqua of Sandlands Vineyards in Napa found out about the bank failure last week from his boss, who “called me and said, ‘I wish you didn’t have any money in a Silicon Valley bank,’” and I was like, “I got all my money in a Silicon Valley bank.”
Passalacqua has been in banking with the financial institution for 11 years and has more than half a million dollars across two accounts that he uses to pay for business expenses such as farming contractors, glass and cork makers, and shipping services.
“I didn’t have much wiggle room on my balance sheet,” he said. “A lot of people were like, ‘It’s going to be okay at the end of the day,’ but you don’t know until you get to it.”
Things were generally smooth on Monday after that mad bank last week, But there were still hiccups.
Shortly before noon, Issa Watson, founder of social media startup Squad, said the company still could not access its Silicon Valley Bank account and kept getting error messages.
“It’s definitely another day of scrambling,” she said.
Her company is moving over to Chase and she hopes to have those new accounts in place by the end of the day. But until the Silicon Valley bank’s money is reached, Watson is on the hook for the Squad’s expenses. She began receiving payment failure notices on the company’s Silicon Valley Bank credit cards on Saturday and was paying the bills with her personal credit cards.
“I run a software company, and we’re in the consumer social space, and we have a tech app and an audio app,” she said. “I can’t take out my back-end database because it didn’t pay.”
Watson said the sudden collapse of Silicon Valley Bank, which served more than half of all venture-backed tech startups in the country, left the founders “rethinking how we do banking.”
Going forward, startups will have to take “more of a front row seat and strategy for how to bank,” she said, “and that’s not something we’ve been thinking about with the same intent before.”
The Silicon Valley bank’s fallout has spilled over into other financial institutions, with First Republic Bank Shares fell 62% on Monday despite assurances from the San Francisco-based bank that funding from the Federal Reserve and JPMorgan Chase has boosted its finances.
The Studio City branch of First Republic was filled with customers on Monday. Someone said he arrived at 9:30 am to withdraw $340,000 and send it to Bank of America.
“They told me it would take half an hour,” he said. “It’s one o’clock now, and we still don’t have the money. They tell me it’s three o’clock now. I’m a little worried.”
A First Republic employee tried to reassure him, saying, “It’s a busy day so it’s just taking a little longer.”
Another client said he decided to withdraw a $200,000 certificate of deposit to reach the FDIC insurance limit of $250,000. He said he was worried about the bank failing and decided to pay a $4,000 fine for early withdrawal of the CD.
As customers scrambled Monday to move their cash, vendors watching from the sidelines said they hoped the turmoil did not seep into their businesses.
Besides being a major bank for tech startups, Silicon Valley Bank has also been deep in the wine industry. For days, said Jennifer Thompson, owner of Thomson Vineyards, a contract grower in Napa, grape growers were trying to figure out which of their clients used the Silicon Valley bank, fearing they wouldn’t get paid on time.
“The first thing the tech guys who own the winery don’t pay is the grower,” she said.
Times staff writers Terry Castleman, Daniel Miller, Ross Mitchell and Melody Petersen contributed to this report.