TechCrunch is current busy reporting the hell out of the SVB crisisbut as we adjust the competitive landscape and learn more about how founders and their VC partners respond, I have a question: How do startups pay for things while fixing the mess?
According to the government, “insured depositors at SVB will have full access to their insured deposits no later than Monday morning.” That’s good, because it appears that some capital will be available to some of SVB’s customers in short order. The issue is that the FDIC only insures a maximum of $250,000 for each account.
This crisis will kill many startups, either quickly or simply by adding enough operational friction to bring them to their knees.
Sure, for the average person, that’s a lot of money. For a startup that needs to do payroll, no.
And the payroll is fair one cost. What about paying cloud providers? Software vendors? Partners? Handle refunds for services and products? Any kind of use of money will now be almost impossible for startups with a material percentage of their capital in SVB.