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The collapse of Silicon Valley Bank has stripped the Bay Area’s startup industry — a key driver of the region’s economy — of a crucial source of funding that for decades has fueled innovation and growth.
“The failure of Silicon Valley Bank leaves an enormous void,” said Ahmad Thomas, CEO of the Silicon Valley Leadership Group, a business-backed policy and advocacy organization. “Looking at their role in lending to startups, where funding wasn’t otherwise available, this has driven economic growth here for 40 years.”
The startup-focused institution headquartered in Santa Clara imploded Friday after a bank run sparked by news of losses in its investments. The California Department of Financial Protection and Innovation shut the bank down and appointed the Federal Deposit Insurance Corporation as receiver to hold its assets for future sale.
Before it went under, Silicon Valley Bank said it provided banking services for nearly half America’s venture-backed startups. The institution not only provided key funding to startups, it also lent money to enable growth at more-established tech companies with hundreds of employees, said Sean Randolph, senior director at the Bay Area Council Economic Institute, a think tank.
“Our economy is considered to be the most innovative in the world and the most effective in turning technology and ideas into companies that hire people and deliver innovative products and services,” Randolph said. “It’s a concern if those companies in the future are going to find it more difficult to find the financing they need to grow and to hire people.”
Startup Genome, a San Francisco think tank, in its 2022 Global Startup Ecosystem Report described Silicon Valley as “the world’s pre-eminent startup ecosystem” and pegged its economic impact at $2 trillion between the second half of 2019 and the end of 2021.
