Startup Accelerator ‘Y Combinator’ CEO: Silicon Valley Bank Failure ‘Disruption Level Event’
Harry Tan, president and CEO of Y Combinator, recently called the collapse of the Silicon Valley bank a “destruction-level event” for tech startups. Y Combinator has helped launch more than 4,000 tech companies, including Airbnb, DoorDash and Stripe.
According to MarketWatch , the failure of Silicon Valley Bank (SVB) has dealt a blow to the tech startup community, fearing it could set back innovation by a decade. Harry Tan, CEO of startup accelerator Y Combinator, warned that the loss of these small businesses could have a significant impact on the economy, calling it a “destruction-level event” for startups.
SANTA CLARA, CALIFORNIA – MARCH 10: People line up outside Silicon Valley Bank’s (SVB) indoor headquarters on March 10, 2023 in Santa Clara, California. (Justin Sullivan/Getty Images)
Tan said, “This is a ‘disruption-level event’ for startups and sets startups and innovation back 10 or more years. BIG TECH doesn’t matter. Their money is elsewhere. All the small startups, the Googles and Facebooks of tomorrow, will disappear if we don’t find a solution.
SVB’s collapse is the biggest bank failure since the collapse of Washington Mutual in 2008, and its closure left thousands of startups in dire straits. At the end of 2022, the bank had 13 locations in California and Massachusetts with total assets of $209 billion and deposits of $175.4 billion. Since many startups make SVB their only bank, $250,000 in FDIC deposit insurance would not be enough.
Breitbart News Business Editor John Carney wrote:
The collapse of the Silicon Valley bank was triggered by a massive run on the bank, with customers beginning to withdraw $42 billion this week.
The bank was taken over by the Federal Deposit Insurance Corporation on Friday after the California Department of Financial Protection and Innovation (DFPI) found the bank insolvent.
According to the DFPI, the bank was in “sound financial condition” prior to the operation. Customers withdrew $42 billion, leaving the bank with a negative cash balance of $958 million.
Here is a summary of what has happened since DFPI took over the bank:
On March 8, 2023, the Bank announced a loss of approximately $1.8 billion on the sale of investments (US Treasury bills and mortgage-backed securities). On March 8, 2023, the Bank Holding announced that the capital increase would be carried out. Although the bank was in good financial condition until March 9, 2023, investors and depositors responded by beginning to withdraw $42 billion in deposits from the Bank on March 9, 2023, which dealt a blow to the Bank. As of the close of business on March 9, the bank had a negative cash balance of approximately $958 million. Despite efforts by the Bank to transfer collateral from various sources with the help of regulators, the Bank was unable to meet its cash letter from the Federal Reserve. The hasty withdrawal of deposits has resulted in the Bank not being able to pay its obligations on time, and the Bank is now insolvent.
Before its collapse, the Silicon Valley bank was the 16th largest bank by assets at the US Federal Reserve System, which shows the bank had $209 billion in assets as of December 31, 2022.
Tan has been outspoken in demanding action to help these startups. He asked the Federal Deposit Insurance Corporation (FDIC) to end the takeover as soon as possible and issued a stark warning that many startups would be forced to shut down without immediate action.
“The most important thing the FDIC and the US government can do right now is to reduce the intake as much as possible,” Tan tweeted. “There are thousands of American startups that have done business with SVB, often their only bank. $250,000 per account won’t last long.
Tan warned of the ripple effect of the “thousands of small businesses” that are “huge drivers of GDP,” saying, “They will never have the opportunity to be like that in the future, and it will come at the expense of thousands of businesses. jobs, if not tens of thousands of jobs, in the future.
“There’s no way the financial world is going to save these companies because we’re going to let these companies die in the next few weeks and that’s next week’s issue.”
The FDIC assured customers that their deposits were safe and that the bank would reopen on Monday. However, many startups are concerned about how this will affect their business. According to Tan, companies call him asking how they can pay their employees because all their money is in SVB accounts.
“What the FDIC really needs to do is look at people,” Tan said. “These are young children, and if we mess them up, it hurts us all. This is a matter of national security. … It will affect the whole economy.
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Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan
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