Generally speaking, it offers the least restrictive terms and equally competitive rates, entrepreneurs say. If a borrower fails, SVB has been known to handle it more gracefully than other lenders. In fact, according to language seen by WIRED, SVB will support companies as long as their venture capital backers (usually customers of the bank) don’t abandon them. “The bankers are your lifeline when you’re in trouble, and if they stand by you, I take that seriously,” James said of his loyalty to the now-collapsing bank.
SVB’s founding CEO, Roger Smith, told the Computer History Museum in 2014 that the bank wasn’t sacrificing profits for flexibility. “When the music stops, we want two chairs, not one,” he said. “But we’re able to help people grow, and … we’re a part of that.”
Just ask former Sunbasket head Zbar. He dreamed up the meal delivery company in 2013 after spending all the venture capital he had raised on different ideas. He has no money to repay the bank loan. But his bankers at SVB liked Sunbasket’s pitch, and investors supported it, so SVB agreed to allow Zbar to continue operating on a monthly basis on new terms while the food business made progress.
“I remember having some unpleasant conversations where I was like, wow, you know, you took a piece of my skin, but my business still exists,” said Zbar, now the chief executive of HamsaPay, which Business loan financing using blockchain. He thinks other banks are not as flexible as SVB. “They just freeze it and you’re done,” he said. Zbar even welcomes his SVB bankers as guests of his bachelor party.
To be sure, SVB’s reliance on the connections and knowledge of venture capitalists to guide its lending decisions has raised questions about whether it will chronically exclude women, minorities or other groups historically overlooked by the startup-financing industry. Investors say some of these issues may be valid, but the bank does present an opportunity.
Craig, an investor who runs Outlander VC, said SVB provides cash to underprivileged groups trying to buy venture capital funds. It offers home mortgages to investors early in their careers who couldn’t get loans elsewhere, based on a deep understanding of the tech companies their clients are betting on, Craig said. “I really want them to rebuild and restructure. No one understands founders and innovators like SVB,” he said.
In recent days, as entrepreneurs have dispersed to other banks, moving their deposits away from SVB, their experiences have reminded them of their love for SVB. James’ Zefr hasn’t found a bank that offers all the services he wants, so he borrows money with one bank and opens a regular account with another. He doesn’t expect Zefr’s growth to slow, but said his company “will have to live with worse conditions or take more risks.”
Gupta, CTO of BonfireDAO, recalls how 10 years ago at his last startup in Singapore, he was able to open an SVB account entirely online, an option he is now missing when looking for SVB alternatives. “They were just the first to really come up with a solution,” he said of his early interactions with SVB. “I never shop around again.”
He wrote on LinkedIn last week, “Many startups like [his] Lost a valuable friend, partner and source of support. If SVB is revived, he said, he would like to stick with it in his heart, but he’s no longer sure it’s financially wise to do so, regardless of ongoing assistance, priceless discounts or the occasional free conference room.
