The swift collapse of Silicon Valley Bank (SVB) on Friday had far-reaching ripple effects in the startup world that extended to ecommerce platforms and brands.
Regulators shut down SVB on March 10 after the bank’s move to raise capital in the face of rising interest rates and a slowdown in tech funding left trust teetering, and gave way to an influx of withdrawals. This left depositors unable to access funds. Read a full explainer here.
SVB was a major lender to startups, as it catered to early-stage companies with financial products tailored to the capital needs of fast-moving and flexible young companies, and the investment firms that backed them. While startups remain a small segment of the economy as a whole, the closure of a bank that was synonymous with tech both in stature and balance sheet left an entire sector reeling.
While deposits up to $250,000 are insured by the banking regulatory arm FDIC, the move to put the bank in receivership meant accounts were inaccessible to many businesses that were already operating lean as they sought to prove out new business models. Those with more than a quarter-million dollars in the bank were left with serious doubts about whether they would see their money.
While the collapse left many fretting over the weekend about being able to make payroll and cover expenses, there were signs of a rescue in sight on Sunday. Regulators announced that all depositors would be able to access funds on Monday, March 13.
The marketplace Etsy was among the ecommerce companies affected, as funds it had at the bank to pay sellers appeared to be inaccessible over the weekend.
“We recently experienced a delay in issuing payments to some sellers related to the unexpected collapse of Silicon Valley Bank,” the marketplace wrote. “Our teams have been working around the clock to implement a solution, and we expect to pay sellers via our other payment partners within the next several business days.”
Following the FDIC’s announcement on March 12, Etsy said it expected to begin issuing payments on Monday.
Shopify, which provides software used by emerging brands to run ecommerce stores, was also among the companies with funds in Silicon Valley Bank. The company posted an FAQ through its Shopify Capital service, which provides financial products for brands that helps provide access to working capital.
"If you have an SVB account on file for Shopify Payments, then your payouts have been temporarily paused," the FAQ stated at one point.
Shopify Capital in the U.S. was also "impacted" by the collapse, the FAQ stated. This meant offers through the program were temporary on hold.
On Twitter, Shopify CEO Tobi Lutke said Saturday that the collapse had a “very minor impact for us.”
“We use SVB as one of ~12 or so banks spread over mostly Canada and US. Canada has stricter banking risk regulations,” Lutke wrote. “A small portion of our US operational fund flows is tied up in SVB but we are working around it and it should be business as usual.”
After seeing the bank where its funds were held shut down, one retailer turned to the tried and true tactic of issuing a promo code to generate fast sales. On Friday, the family experience retailer Camp advertised 40% off for customers who used the code “BANKRUN.”
“Unfortunately, we had most of our company’s cash assets at a bank which just collapsed,” cofounder Ben Kaufman wrote in an email to customers.
The popup ad that greeted visitors to Camp's site on Friday captured the mood of the moment:
(Screenshot via Camp)
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