SVB provided technique when everyone else ignored us

The author is a partner at Sequoia Capital

Not much suggests a connection between Siena, Tuscany’s most majestic hill town, and the lowlands of Santa Clara, the Northern California city that’s home to Great America theme park and Levi’s Stadium, home of the San Francisco 49ers. But there is a connection that has become painfully clear in the past few days.

In Siena, the Bank of Monte dei Paschi di Siena has played a central role in the surrounding community since its foundation in 1472. In Santa Clara, Silicon Valley Bank — or SVB, as it later became known — gained a reputation for being a pillar of the technology industry since it opened in 1983.

There are worlds between the history and the peculiarities of the individual banks. But since 2013, when the Monte dei Paschi di Siena melted away and became a shadow of itself, the local community has felt the pinch. Businesses have found it more difficult to obtain funding and many community organizations have lost a source of vital support. Both Siena and the surrounding countryside are poorer because of the bank’s problems.

For those of us who have worked in Silicon Valley for the past forty years, SVB is our most important business partner. Up until this week, we have always advised founders to open a bank account with SVB immediately after making a seed or venture investment decision. It’s no coincidence that Stripe’s Atlas program, which allows non-US companies to set up a US corporation, used SVB as a bank. (Sequoia is Stripe’s largest investor.) Before SVB was launched, it was difficult, if not impossible, for a startup to develop a relationship with a large, established bank. Small West Coast tech companies were incomprehensible or irrelevant to the big East Coast banks, whose clients included international airlines, heavy industry, and nationwide retailers. Our businesses, often started by people in their 20s, have been bypassed or ignored.

As technology crept into every crack in the economy, SVB gradually followed. The bank opened offices where the entrepreneurial spirit was alive – both in the US and overseas. Like all of us, SVB has had its ups and downs, but has largely stayed put and evolved like the start-up economy.

The SVB have perversely paid a price for their loyalty. Much is said about the reasons for its demise, but few will delve into what made it so special to us in Silicon Valley. SVB stayed close to its roots and its customers. When it collapsed, almost all of its 40,000 customers were tech companies — a drop in the bucket for the big banks.

SVB was like the cherished local market where the people behind the counters know the names of their customers, have a smile on their face but still charge the usual price when selling a piece of meat. When a small tech company got into trouble, we knew we would get a sympathetic hearing, but we also knew we would have to pay the whistler.

In the broader Silicon Valley community, SVB and its many employees could always be counted on to quietly and modestly support students applying to college, tend community gardens, supply food banks, or keep the elderly company.

I’m sure many will gaze at their demise and the ungodly amount of fear mongering on social media and gleefully laugh at how the tech industry just took a beating. So be it. We do not seek special treatment or handouts. When a bank fails—even if it’s our bank—that’s the price we pay to live in an economy where success is rewarded and failure is punished. However, if adequate steps are not taken to ensure tens of thousands of entrepreneurs can meet their payrolls and other obligations, US hold on a number of disruptive technologies will be significantly weakened.

But when a community loses its bank, whether in a Tuscan mountain town or on the Pacific coast, it’s like a death in the family. Once again, the fortunes of thousands of small tech companies and the vitality of the start-up economy will once again fall into strange hands, and the US will be all the poorer. SVB provided technique when everyone else ignored us

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