Utah’s tech industry reacts to Silicon Valley Bank’s failure, government help
Mar 13, 2023, 5:52 PM | Updated: 7:19 pm
COTTONWOOD HEIGHTS, Utah — As state, federal and tech industry leaders scrambled to find a solution over the weekend, many founders and CEOs wondered whether they would be able to pay their employees after Silicon Valley Bank failed.
“That’s why this was so problematic,” said Gavin Christensen, the founder of Kickstart Fund, a venture capital firm that has helped build more than 200 companies. “This type of stuff was going to kill a lot of startups.”
Christensen said at least half of Utah’s tech startups have financial connections with Silicon Valley Bank. He said they were a good partner to have — fast, flexible and focused on the needs of startups.
“We also bank with Silicon Valley Bank, and so, as the crisis was progressing, all of us were looking at Monday saying we need to make payroll for our business. Our 100+ companies need to make payroll. And we don’t have access to our money,” he said.
Christensen said he was at the bank’s headquarters in California last Wednesday. He said you could tell there was some concern then, but no sign the bank would collapse just a day or so later.
“It failed in a day,” he said.
“Time was so important. Every hour, every day was so important because jobs were going to be lost, employees were going to be let go, companies were going to die. So, thankfully by the end of the weekend, the administration and regulators understood what was at stake and acted appropriately.”
Christensen said it was “appropriate” that investors in the bank would not be saved from financial losses, but said, “for deposit holders to know their money is OK is what we needed.”
“Thousands of employees would have been impacted [in Utah],” said Kat Kennedy, a general partner at Kickstart Fund.
Kennedy knows what it’s like to struggle to grow a business, having played a large role in growing Degreed from its start in 2012 until she left last year. She praised state and tech leaders who immediately got to work looking for a solution after the bank’s failure.
She said when the federal government announced its plan to help depositors on Sunday, “all of us took a breath of — oh, thank goodness, because it really could have cascaded far beyond Silicon Valley Bank.”
By Monday morning, Christensen said Kickstart Fund had regained access to their bank account. But it’s still unclear what the future holds and who will help fill in the gap that Silicon Valley Bank leaves behind for so many of Utah’s companies.
“There’s an opportunity for other banks here locally to step in and to fill what will be a pretty significant vacuum,” Kennedy said.
Christensen said he’s “very confident it will get sorted and these companies can get back to the hard business of building something that customers value.”
Local leaders react to collapse
“The people in Silicon Slopes and across our state had a big impact on the Fed and the FDIC and the administration making the right decision,” said Sen. Mitt Romney, R-Utah.
Romney said there will be plenty of time to dissect what happened to Silicon Valley Bank. Right now, he hopes companies in Utah can get back to doing business.
“I think it’s fair to say that either the regulations or the regulators didn’t provide the warning that was necessary,” Romney said.
The president of the Utah Bankers Association called the collapse of Silicon Valley Bank unfortunate and unnecessary.
“They moved $40 billion out of a bank in a matter of hours — no bank can handle that,” said Howard Headlee.
He also made it clear that the demise of the bank is much different from the financial meltdown in 2008 when borrowers were unable to repay their loans.
“That is not what’s happening here,” Headlee said. “Our loans are strong. Our capital is strong. Our liquidity is strong. This was a certain, very unique circumstance.”