Stanley Rameau had been sold on Silicon Valley Bank since first being introduced to the bank in the fall of 2022. In the months following, Rameau decided to use SVB as the bank for Renavest, the financial education service he founded.
But in early March 2023, SVB, the 10th largest bank in Massachusetts at the time, crumbled before Rameau could open that account. Hundreds of other Boston-based entrepreneurs and account-holders were left confused, traumatized and scrambling to pick up the pieces.
“It was scary. And yes, from a selfish perspective, I haven’t placed any money there,” Rameau said. “But I was worried about the individuals there. Would they still have a job? Also, how does this slow down the process for founder growth in general? There were already murmurs about it being a tough economic space for founders, especially from a funding standpoint. It was a lot of unknowns.”
Over the course of decades, Silicon Valley Bank had built a reputation as being the go-to bank for startups, with its aggressive lending approach and understanding of the sector. To many tech startups that may have had trouble securing much-needed capital from more traditional banks, SVB offered itself as a haven.
One year after the collapse, SVB is going back to the startup sector and trying to recapture that business. And Rameau — who had become a regular at SVB-hosted startup and networking events — is now in the process of opening that account with SVB.
“Because I wasn’t engaged, banking-wise, it’s hard to have … lost complete faith,” Rameau said of his experience before the bank’s failure. “A lot of my faith was in the individuals who worked on that startup-banking team.”
Mark Gallagher, co-head of investor coverage, said 81% of SVB’s pre-collapse clients have maintained active accounts with SVB, thousands of clients have returned to the bank and hundreds of new clients have joined.
Human touch is ‘regaining trust’
What’s to credit for the regained confidence in SVB, which suffered the third-largest bank failure in U.S. history? Gallagher says it’s the human touch SVB has with the companies with which it works.
“By consistently showing up, and just being empathetic and human, as we have always been, I think we’re slowly but surely regaining trust,” Gallagher said. “I think that speaks to the fact that we have been such a supportive member of the community for so long.”
The stability of First Citizens Bank, which acquired SVB two weeks after its collapse, and its conservative approach have been instrumental in ensuring both current and potential clients maintain trust in SVB.
“With that stability at First Citizens comes a very stable deposit base and greater liquidity,” said SVB president Marc Cadieux in a recent interview with the Business Journal. “We think the combination of SVB with First Citizens just makes for a stronger and more stable financial institution.”
Venture capitalist Jeff Bussgang, general partner and co-founder of Flybridge Capital Partners, had tens of millions of dollars with the bank at the time of the collapse.
“It was stressful for us as support system providers for our founders. But also for Flybridge in particular, because all of our accounts were at SVB,” Bussgang said. “All of them. All of our money, all of our funds. We had over 40 accounts (with SVB).”
‘Less focused on community, civic investment’
Bussgang described the relationship with SVB as a “prisoner’s dilemma situation” once the stock dropped 60%. Flybridge saw that things were shaky, particularly as the earnings announcement just ahead of the collapse was released. But he was not inclined to initiate a bank run and hurt the startup ecosystem, so Flybridge attempted to stand fast and support the bank.
“At the same time, we were counseling our portfolio companies to be cautious and pull some money out and set up a backup, have a plan B, get ready for a plan B, set things up to move on a moment’s notice,” Bussgang said. “It was a pretty delicate balancing act.”
In the wake of SVB’s collapse, there’s been a reaction from other players in the startup-lending space.
“Once the dust settled and takeover occurred by First Citizens, it’s been business as usual,” Bussgang said. “So, shockingly, if you take a step back now in 2024, it’s as if it never happened. The market has moved so quickly to fill the gap.”
Even while his firm still does business with SVB, Bussgang said he misses “the old SVB.”
“SVB was a huge supporter of the startup ecosystem and more of the community efforts,” he said. “The new SVB is just a bit smaller and a bit less focused on community and civic investment.”
New market entrants
Michael Greeley, general partner with Flare Capital Partners, said the longer-term impact seen from SVB’s collapse is that more lenders are getting started. The massive void created by SVB’s diminished presence has quickly been filled.
“It tells me that this is really an isolated risk management policy at SVB. It’s not a comment on the broader market opportunity because other new players are coming back into the market. And they’re being quite aggressive and quite active,” Greeley added.
SVB welcomes the new entrants into the startup banking space, Gallagher said, as the competition will make them stronger. With more than 40 years of expertise in the area, Gallagher is confident in SVB’s ability to remain a top player in the market.
“We are the OGs, and we’re still around. I’ve seen competitors come for the last 24 years. None of them have yet been capable of taking our perch. And that, in part, is because this is all we do, and this is 40 years of understanding the founder-funder journey,” Gallagher said.
In Massachusetts, SVB lost nearly $4 billion in deposits, and the bank is on a three-year plan to regain those lost deposits. For 2024, SVB plans to continue the work it did in the second half of 2023 — issuing more than 500 loans totaling more than $3 billion and supporting more than 300 companies with nearly $1.8 billion in venture-debt commitments.
In 2025 and 2026, Cadieux said the bank hopes to provide a broader and more valuable proposition to clients.
“SVB is very much open for business, doing all the things that were so valued by our innovation economy clients before,” Cadieux said. “Boston’s a super-important market for us, and we’re not intending to go anywhere.”
Gallagher also stresses the importance of Boston as an SVB market. The Silicon Valley–based bank has had a physical presence in Boston since 1991.
To ensure founders that SVB is still a viable option for them, SVB must continue to be engaged in the community, he added. Last year, SVB hosted more than 50 events for the startup community in Boston. This year, the bank has more than 60 events planned.
“We’re still supporting the ecosystem, as we have in Boston for the last 33, 34 years,” Gallagher said.
For Rameau and other tech entrepreneurs, SVB still provides a shorthand that many other banks don’t have. While the precarious situation of last March placed a dark cloud over SVB, the bank reminds clients that it’s open and ready to serve the innovation economy.
“I don’t think they have to recreate the wheel, just make sure something like that doesn’t happen again,” Rameau said. “I was joking with one of my friends who banks with them — what’s the likelihood of them failing twice?”