The SVB crisis sparked a four-day panic as startup executives sought capital

After turning on CNBC last Thursday to see SVB’s stock price plummet and news of venture capital firms urging startups to exit, EarthOptics CEO Lars Dirud was quick to act. At 4:00 PM ET, he requested a wire transfer of $25 million to Silicon Valley Bank, roughly 90% of his company’s deposits.

It was already late. EarthOptics did not receive a response Thursday, and the next day SVB was seized by regulators in the second-largest bank failure in U.S. history. Dyrud had no idea when he would be able to access his company’s deposits, as the Federal Deposit Insurance Corporation guarantees only $250,000 per customer.

Like thousands of SVB customers, Dyrud’s biggest concern was the lack of wages for March 15, which was just days away. He spent all of Friday and the weekend developing a contingency plan that centered on a $1 million loan from three board members, including one investor who would funnel the funds to BambooHR, the company’s payroll processor.

“We started planning to be out of money for nine months,” Dirud said in an interview Tuesday. “We had four plans in priority order in case something went wrong.”

Late last week, Dyrud sent his staff a Slack message informing them of the situation.

“Ultimately we expect to recover, but we need to prepare for alternative access to cash while this is sorted,” Dirud wrote in a note he shared with CNBC.

SVB’s swift collapse sent shockwaves across Silicon Valley as the failure of the largest bank for venture capital startups threatened to indefinitely freeze access to the money companies need to pay their employees, vendors and partners and destabilize the banking system.

Investors and depositors had pulled $42 billion from SVB by the end of Thursday after the bank said it was selling $21 billion worth of securities at a loss and trying to raise more capital, according to California regulators. At the time, Dirud feared it would be the fastest bank the country had ever seen because of the nature of the clientele and the speed at which information spread.

On Friday afternoon, Dirud went with his chief administrative officer and controller to the local resident Wells Fargo branch in Arlington, Virginia to open a new account. It was the only bank that would open a same-day account for his 75-person startup, whose technology is used by agricultural companies and farmers to measure the condition of their soil.

That evening, Dirud held a 45-minute board meeting scaling to make sure everyone was aware of the game plan and the loan agreement, which was structured as an unsecured promissory note. Dirud said he has been talking 12 hours a day since Thursday.

Four days of panic finally ended late Sunday when regulators announced a plan to support deposits and ensure all customers can get their money back starting Monday.

Earlier this week, EarthOptics kept its money at Wells Fargo and paid back loans to two investors. Dirud said he was able to call off the third investor’s loan before the money was sent.

“It was the most intense two-day loan in history,” Dyrud said.

Otter.ai founder and CEO Sam Liang spent Monday at SVB’s Silicon Valley office to try to get his company’s millions of dollars back.

Liang said the company, whose software transcribes audio from meetings and interviews, tried to initiate a transmission Thursday night, but it did not happen.

“We were really worried over the weekend, watching the news all the time,” Liang said in an interview Monday in the parking lot of the SVB branch in Menlo Park, Calif. “Checked Google watched like 20 times an hour [Treasury Secretary Janet] Yellen talks about not bailing out a Silicon Valley bank.”

He woke up at 7am on Monday and tried to log into his account, but kept getting error messages because the system was overloaded. That’s when he got into his car.

“I thought, OK, I’ll just physically go to the office,” Liang said. “First I went to the Palo Alto office. There was a line, but the guy said there was nothing they could do. I went from the Palo Alto office to the Menlo Park office.” At that department, Liang said he waited 90 minutes to two hours for help.

Liang said he was lucky that Otter, which has about 100 employees, had moved most of its money to another bank a few months earlier, though he did not say why. However, he said the company has a lot of cash in SVB — in the millions of dollars but less than $10 million — which would represent a “huge loss” if it were to disappear.

“We need to make sure payroll and everything is working,” Liang said.

He was unable to get hold of all his money at once, although he is confident it is all available under the plan announced by regulators on Sunday.

“I just got the cashier’s check,” he said. “They couldn’t give us everything, so they gave us a percentage of the money. We’ll probably have to do it again later today.”

Meanwhile, as clients planned their next move, SVB’s newly appointed head sent out a request to clients to go home.

Tim Maiopoulos, who was appointed by the FDIC as CEO of the bank, now called Silicon Valley Bridge Bank, told customers in an email that SVB is open for business and ready to accept and hold deposits.

“The single most important thing you can do to support the future of this institution is to help us rebuild our deposit base by leaving deposits with Silicon Valley Bridge Bank and returning deposits left over the past few days,” Maiopoulos wrote in an email. which was also posted on the company’s website.

Liang said Otter opened accounts at two major banks over the weekend and will “distribute the money across multiple banks.”

Dirud has a similar plan. At the moment, all of EarthOptics’ money is with Wells Fargo, but he said the company will soon distribute some of it to JPMorgan Chase and another bank.

“It just makes sense,” Dirud said. “We wouldn’t be in this position if we even had a second bill.”

Dirud traveled from Washington, where he is based, to San Francisco for the conference this week. Dirud said he never did business with SVB before running EarthOptics, but he spoke to people at the event who have longer and deeper ties to the bank through venture debt and other types of financing.

“There are some more loyal than I,” he said.

Will Glazer would put himself in the more loyal category, though he’s had an equally chaotic four days as he tries to shore up his company’s liquidity.

Glazer is the founder and CEO of Grabango, a developer of checkout-free shopping technology. A longtime Bay Area technologist, he co-founded Pandora in 2000.

Grabango was more limited than some other companies in how it could respond to the SVB crisis because of the terms of its agreement with the bank. Grabango is relying on the bank for a line of venture capital debt, which includes a provision that prohibits the company from doing many banking transactions with other institutions.

This exclusivity created a major headache for Glazer over the weekend. He wasn’t sure how he would be able to raise the funds needed to pay wages on March 15 without violating his company’s agreement with SVB. And no one answered the phone at the bank to tell him that everything was fine, or, on the contrary, to help him get an additional short-term loan from SVB.

“I definitely struggled with my team and investors to find alternatives,” Glazer said. “There was never a moment when I thought we would lose our deposits, but it was definitely a liquidity crisis. Will we have the money and the time to do the payroll?”

Glazer said he had been communicating with his investors and lawyers at Orrick, Herrington & Sutcliffe all weekend. They discussed all possible contingencies and tried to determine if there were any emergency financing options to pay the company’s 110 employees without potentially violating the terms of the SVB contract. It could be because “I’m personally funding the payroll” or “one of our investors is leaning,” he said.

In the end, Glazer was relieved to have to make a tough decision. All of Grabango’s cash in the bank, which is in the double-digit millions, will be available by Monday for the company to transfer the money to its payment service provider and calculate payroll by Wednesday.

Not that things were smooth sailing on Monday, when Glazer was among the many SVB customers trying to get back to work. The bank’s technical system was not ready for the onslaught.

“I’m on the SVB website and I felt a little bit like a teenager trying to buy Taylor Swift tickets,” Glazer said,

Despite the insanity that enveloped Thursday and Monday, Glazer is now more confident about his banking situation than ever. Prior to the launch of SVB, Grabango deposits were not protected. They are now under government depositor protection, insured or uninsured.

Grabango even opened an additional credit line with SVB this week, giving the company greater access to capital for its hardware business.

“I think the world will become more diversified in the future,” Glaser said. “But for now, as long as Silicon Valley Bridge Bank is 100% federally guaranteed, there’s no need to diversify. There’s no safer place to be.”

— CNBC’s Rebecca Smith contributed to this report

WATCH: This is how the legislators look at the collapse of the SVB