“‘This is an “extinction level event” for startups and will set startups and innovation back by 10 years or more. BIG TECH will not care about this. They have cash elsewhere. All little startups, tomorrow’s Google’s and Facebooks, will be extinguished if we don’t find a fix.’”
That’s Garry Tan on Twitter following the Friday failure of Silicon Valley Bank, the largest bank failure since the collapse of Washington Mutual in 2008, calling it an extinction-level event for startup businesses with the potential set innovation back by a decade.
The president and CEO of startup accelerator Y Combinator fired off that tweet after the Federal Deposit Insurance Corp. was placed in receivership of Silicon Valley Bank, a unit of holding company SVB Financial Group
after its closure by California regulators.
A problem with FDIC receivership is that the federal regulator only insures deposits up to $250,000.
Tan had something to say about that:
Silicon Valley Bank operated 13 branches in California and Massachusetts and had about $209 billion in total assets and about $175.4 billion in deposits as of the end of 2022. The bank will reopen on Monday, according to the FDIC.
Tan went on CNBC and made an even more dire prediction:
Of these “thousands of small businesses” and “big drivers of GDP” in the future, Tan said this: “They’re never going to get a chance to be that in the future, and that will be to the detriment of thousands of jobs, if not tens of thousands of jobs, in the future.”
“The financial world does not have the capability to save these companies, like, we will just wholesale throw out startup innovation in America if we allow these companies to die in the next … weeks … and it really is a matter of next week.”
Tan said companies have been calling him, asking how they’re going to make payrolls as all their cash is in SVB accounts.
“What the FDIC really does need to do is take into account these people, these are the small guys who, if we damage them, it hurts us all,” Tan said. “This is a national-security issue. … This will splash across all of the economy.”