Like many entrepreneurs who banked with Silicon Valley Bank before its spectacular meltdown last week, Seattle startup founder Justin Beals is trying to prep for a post-SVB world.

SVB reopened Monday, thanks to a federal rescue plan that ensured all SVB deposits, and the bank may be sold, in whole or in parts, to other banks. Despite those assurances, however, many SVB customers — and many others who specialize in high-risk, high-reward entrepreneurial ventures — are preparing for a decidedly different financial environment.

Beals, CEO of Seattle-based security compliance startup Strike Graph, still has most of his company’s deposits at SVB. But he’s closely watching federal efforts to find a buyer for the failed California bank and has set up alternative bank accounts in the event that “Silicon Valley Bank is winding down.” 

Other moves will be harder to game out. In 2021, when Strike Graph raised $8 million in venture capital, it also got a several-million-dollar loan from SVB. Beals expects the loan will go to whomever buys SVB — but also that any buyer may want to renegotiate the terms to reflect a dramatically changed economic climate.

“Capital is more expensive,” Beals says, adding that startups looking to raise funds now should expect “very different terms than what you might have seen a year ago.”

Similar conversations are playing out at thousands of tech startups and other SVB customers after regulators closed the bank March 10 amid a panicked run by depositors and growing anxieties across the global financial system.


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For some, the adjustments are as straightforward as changing how they manage cash.

At Walla Walla Vintners, one of many wineries in Washington that banked with SVB, owner Scott Haladay is sticking with SVB, which he still considers the top bank for winemakers — especially those, like him, “in growth mode.”

But he’s also just opened a new business checking account at another bank, where he plans to keep “two payrolls worth of funds just in case something happens with Silicon Valley Bank.”

For many SVB customers, however, pivoting to a post-SVB world also means bracing for deeper changes in how, and whether, entrepreneurs can find capital.

Even before the bank’s collapse, higher interest rates and a slumping tech sector had taken much of the air out of the venture capital-fueled startup balloon.


For years, venture capital firms had been “telling their portfolio companies ‘grow, grow, grow, grow, grow, spend the money as fast as you can and grow at all costs,'” says Isaiah Deporto-Plick, a Seattle startup veteran and former SVB employee who currently directs business development at an AI startup, Dory. “And then they moved the goal posts.”

Those moving goal posts were part of a broader market shift that ultimately tripped up both SVB and many of its customers.

Until early 2022, years of low interest rates had encouraged many investors to seek better returns by, among things, pouring money into the VC, or venture capital, sector.

VC firms in turn poured money into startups, which helped encourage these new companies, many of them years from profitability, to adopt ultra-ambitious growth targets that justified the massive valuations implied by all those VC dollars.

That zero-interest “frothy” market encouraged a narrative “of massive funding rounds and super-quick paths to unicorn valuations,” or startups with billion-dollar valuations, says Leslie Feinzaig, founder and managing director of Graham & Walker Venture Fund, a Seattle-based venture VC with a portfolio of 32 startups, a third of which bank with SVB. “It was almost like, collectively, we were rewarding the fundraise [itself] as the moment of success.”

But starting in early 2022, with the arrival of higher interest rates and a post-pandemic tech slump, investment into the VC sector plunged. By late 2022, inflows were down more than 75% from late 2021, according to data from Ernst & Young.


That pullback led many VC firms to rein in funding for startups, which had a domino effect.

With less funding, many VCs had to downsize their growth plans. At Strike Graph, for example, it was clear to management “that if you’re not going to be able to raise lots of capital to fund the growth, then you need to adjust,” Beals says.

Many startups also had to lean more heavily on the cash they already had in their banks. That would ultimately prove disastrous for SVB, which by early March was no longer able to cover all those unanticipated withdrawals.

SVB’s failure, in turn, further magnified the effects of the VC slowdown.

The bank has been one of the biggest providers of venture debt, which is used by early-stage startups that have received partial backing from VC firms but may still be years from profits or even revenues. (Qualifying startups could typically get venture debt equal to 25% to 35% of their VC funding, according to the SVB website.)

SVB had also become a key financier for Black, Latino and women-founded companies, which federal data shows are less likely to get financing than white-run companies.


With SVB’s future up in the air, it’s not clear how easily startups of any kind will be able to secure venture debt.

Mainstream banks have been happy to welcome SVB’s deposits, but few may have the appetite to extend credit to businesses that don’t have self-sustaining revenues, says Mark Mason, CEO of Seattle-based HomeStreet Bank.

“We looked at a lot of technology loans several years ago, and decided that we just were not comfortable banking early-stage or midstage companies,” Mason says.

SVB isn’t the only supplier of venture debt, but it was reportedly among the least expensive. And some startup founders say the VC pullback means that any venture debt will be harder to secure.

Where a startup might have paid 10% interest on certain kinds of venture debt a year ago, it might be 14% today, according to the CEO of a Seattle-based tech startup who asked not to be identified to avoid antagonizing funders.

And since SVB’s failure, the CEO says, “we’ve had certain of our VC investors reach out and recommend that nobody uses [venture debt] unless you absolutely need it.”


The lull in startup investment won’t last forever, many industry insiders say. Improving business and credit cycles will eventually rekindle VC funding. Other lenders will step into the venture-debt void left by SVB.

“Everybody’s shaky and nervous,” Graham & Walker’s Feinzaig says. But venture capital is still “the fastest path to public companies [and] a proven model for how super innovative technology, biotech, climate tech businesses take off and make a lot of people money in the process,” she says.

In the meantime, many startups will be forced to adapt by, for example, lowering growth goals or using their existing capital more efficiently. “What you’re actually going to see is more quality and better startups,” predicts Raja Mawad, founder of Seattle-based health startup Thrv and several other companies.

But not all startups will survive the shift, Mawad says. “You’re going to have a pretty big extinction event,” he says.

And thanks to SVB’s wide-ranging portfolio, the disruptions won’t be limited to tech.

That’s clear in the very capital-intensive wine business, where vintners wait several years before a harvest actually pay off.

“From harvest and fermentation to the time that that wine is released is several years and that ties up a lot of cash in inventory before the revenue can be realized,” says Walla Walla Vintners’ Haladay.

Many vintners use credit lines to cover those investments, and Haladay thinks that’s now going to get more expensive. Banks are “going to be really looking to make sure that you have solid margins dropping out of those sales to [extend] those lines of credit,” he says. “It’s going get tighter there for sure.”