This post originally appeared on Northeastern Global News. It was published by Beth Treffeisen.
An entrepreneur's backbone is gone with the collapse of Silicon Valley Bank, which provided services to nearly half the country's venture capital-backed technology and life-science companies.
The bank's closure followed interest rate hikes that hurt its startup customers and failed attempt to raise capital that spurred customers to withdraw deposits. The sudden collapse was the second-biggest bank failure in U.S. history since 2008.
The Federal Deposit Insurance Corporation took over the 40-year institution on Friday, and it's about $175 billion in customer deposits. The FDIC announced that both Silicon Valley Bank and the collapsed crypto-focused Signature Bank customers are receiving 100% of their deposits back.
“Given the bailout, I don't think there's anything else that people should be worried about,” says John Bai, an associate finance professor at Northeastern. “I think confidence should still be there.”
The thought of losing cash—the lifeblood of any startup—without any fault of your own is very unfortunate, says Karthik Krishnan, an associate professor of finance at Northeastern and CEO and co-founder of MentorWorks. This fintech venture provides income-based financing to students in higher education.
“It's so dynamic it's woozy,” Krishnan says. “It makes me crazy woozy.”
In England, the U.K. Treasury facilitated the sale of a Silicon Valley Bank subsidiary to HSBC, Europe's biggest bank. The deal protected 6.7 billion pounds ($8.1 billion) of deposits.
With questions swirling around the dependency on specialized regional banks, where should entrepreneurs go with their investments?
Northeastern Global News asked university experts for their advice.
