Tech executives raced to save startups from ‘doom’ after the SVB collapse

PALO ALTO, California, March 12 (Reuters) – Tech executives, major venture capitalists and founders, including OpenAI CEO Sam Altman, raced this weekend to keep alive companies caught up in the collapse of Silicon Valley Bank ( SIVB.O ).

Friday’s dramatic loss by the bank, which focuses on tech startups, was the biggest since the 2008 financial crisis. It rattled global markets, sent bank stocks reeling and left California tech entrepreneurs worried about how to make payroll.

Looking to avoid what Gary Tan, CEO of startup accelerator Y Combinator, called a potential “doomsday event” in the tech industry, industry executives moved quickly to do what they could to save small businesses.

Altman, who runs one of Silicon Valley’s hottest companies, has bailed out some entrepreneurs out of his own pocket, according to a Twitter message from his brother and a user who spoke to Reuters.

Latest Updates

See 2 more stories

“I was out of options, so I sent him an email,” Dr. Kurson, CEO of Rad AI, said in an interview Saturday. Within an hour or two, Altman responded, offering him six figures: enough to pay the wages and no taxes attached, a request to return the funds once Kurzen was done, he said.

Asked for comment, Altman told Reuters, “I remember the investors who helped me when I was running a startup, and I really needed that, and I always try to pay it forward.”

Henrique Dubucras, co-CEO of fintech startup Brex, spent the weekend working on the phone to help startups get their next paycheck after his company announced an emergency credit line on Friday.

See also  Hamas Leader Netanyahu Says Gaza Ceasefire Deal, Hostages Closer

As of Saturday evening, Brex had received $1.5 billion in demand from nearly 1,000 companies, he said. “We are trying to register lenders by the end of tomorrow. Everyone is moving fast,” he said.

Even small startups are taking steps to help others. Aleem Mawani, founder of Streak, a company with about 30 employees, tweeted on Friday that he would lend his personal money unconditionally to other small startups concerned about paying employees. He said he then talked to a few companies and aimed to prioritize lending to people living paycheck to paycheck.

“I’m a founder and I know how bad it is to not get paid,” Mawani said in an interview.

‘Misconduct or mismanagement’

Late Saturday, more than 3,500 CEOs and founders, representing about 220,000 workers, signed a petition launched by Y Combinator over the next 30 days.

The petition calls for “stronger regulatory oversight and capital requirements for regional banks” and an investigation into any “mismanagement or mismanagement” by SVB executives. The petition warned that more than 100,000 jobs could be at risk.

SVP did not respond to a request for comment, and Y Combinator did not elaborate on the petition.

Venture capitalists have advised startups to look for alternative ways to get short-term cash flow. Some, including LowerCarbon Capital, have lent funds tied to SVB to portfolio companies.

Its partner, Clay Dumas, said LowerCarbon would provide wage support for the next two weeks and wire the funds on Monday.

Khosla Ventures told Reuters, “In a rapidly evolving environment, we are working with 100+ portfolio companies to assess their critical needs and plan to tie-up where we are a lead or large investor.”

See also  Tropical Depression 4: Check out the latest tracks, models


Rat AI’s Kurzen emailed the OpenAI chief Saturday morning after he hadn’t spoken to Altman in years, desperate for help. The startup relied on SVP, and the sudden shutdown left it with no money to pay about 65 employees on Monday, he said.

“People’s livelihoods depend on us,” said Kurzen, whose San Francisco-based company helps radiologists work more efficiently and includes employees with a wide range of roles. “They’ve got mortgages to pay; they’ve got bills.”

He said Gurson’s co-founder spent eight hours on the Federal Deposit Insurance Corporation hotline to no avail. Multiple attempts to transfer funds from SVB failed.

But Kurzen saw Altman’s Twitter post, having met him in 2014 as a co-founder at Y Combinator, where Altman was president. The two men did not know each other well, he said.

“It’s like a lifeline,” Kurzen said of Altman’s generosity.

Kurzen estimated “conservatively” that Altman has given more than $1 million to support other startups with similar needs.

“The crazy thing here is that he’s not an investor in our company,” Kurzen said. “He didn’t hear anything.”

Altman would not comment on how much he gave to the organizations, but said he did not see his contributions as risky.

“Even if SVB can’t find a buyer or a loan by the end of the week, the startups will get a lot of the money they have on deposit. But in the meantime, people are facing a real cash flow crisis through no fault of their own. They have to pay their employees,” he said.

Reporting by Jeffrey Dustin in Palo Alto, Anna Tong and Crystal Hu in San Francisco; Additional reporting by Tatiana Bautzer; Written by Kenneth Li; Editing: William Mallard

See also  Prosecutors say at least 25 Trump campaign witnesses withheld information under attorney-client privilege

Our Standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published. Required fields are marked *