Overall, it offered some of the least restrictive terms and equally competitive interest rates, entrepreneurs say. When a borrower failed, SVB was known to handle it more gracefully than other lenders. In fact, according to language seen by WIRED, SVB will back the companies until their venture capital backers, often clients of the bank, abandon them. “The bankers are a lifesaver when you’re in trouble, and if they back you up, I take that seriously,” James says of his loyalty to the embattled bank.
Roger Smith, SVB’s founding CEO, told the Computer History Museum in 2014 that the bank had not sacrificed profits by being flexible. “When the music stops, we need two chairs, not one,” he said. “But we were able to help people grow and … we were part of the flow.”
Just ask Zbar, former Sunbasket executive. He came up with the food delivery company in 2013 after spending the venture funding he raised for another idea. He had no money to repay the bank loan. But his banker at SVB liked Sunbasket’s performance and investors backed it, so SVB agreed to let Zbar continue to operate monthly on new terms as the food business grew.
“I remember a few nasty conversations where I was like, ‘Wow, you know, you took a piece of my skin, but my business still survived,'” says Zbar, now chief executive of HamsaPay, which uses blockchain to finance commercial loans. He believes that other banks are less flexible than SVB. “They just freeze it and it’s done,” he says. The congregation even welcomed its banker SVB as a guest at the bachelor party.
To be sure, Bank of Silicon Valley’s reliance on the connections and knowledge of venture capitalists to make lending decisions raises questions about whether it has perpetuated the exclusion of women, racial minorities, or other groups historically overlooked by the startup funding industry. Investors say some of those concerns may be valid, but the bank has opened up opportunities.
SVB funneled cash to people from underrepresented backgrounds who were trying to buy money into venture capital funds, says investor Craig, who runs Outlander VC. He provided home mortgage loans to early-career investors who couldn’t get them elsewhere, based on a deep understanding of the technology companies his clients were betting on, Craig says. “I really hope they rebuild and rebuild. Nobody understood founders and innovators like SVB that way,” he says.
As entrepreneurs switched to other banks to transfer their deposits from SVB in recent days, their experience reminded them of what they like about SVB. Zefr James has not found any bank that can offer him any services, so he uses one to borrow money and another for regular bills. He doesn’t expect Zefr’s growth to slow, but says his company “will have to suffer worse conditions or take on a little more risk.”
Gupta, who is the CTO of BonfireDAO, recalls how he managed to open an account with SVB completely online while in Singapore at his previous startup a decade ago, an option he did not find while looking for SVB alternatives. “They were just the first to really offer solutions,” he says of his early involvement with SVB. “I never went shopping again.”
He wrote on LinkedIn last week that “a lot of startups like it [his] have lost a valuable friend, partner and source of support.” He says his heart wants to stick with SVB if it is resurrected, but he’s no longer sure it makes financial sense, regardless of the ongoing help, the priceless discounts or the occasional free conference room.