Silicon Valley Bank Liquidation: Startups In Dare And Win

As the saying goes, one's misfortune can be a silver lining and like the proverbial alchemist that turns copper into gold, a few daring startups may spruce up the negative perspective to the evolving Silicon Valley Bank (SVB)'s saga in a 'dare and win' perspective to strike a fortune.

Indeed, sometimes leaving stealth is not necessarily your own choice but a force function of two of your largest competitors evaporating from the business, and the third triggering clients so much that there’s talk of a bank run.

At least that is the case for Series CEO Brexton Pham, who has been building a full-stack enterprise platform for institutions and enterprises since March 2021.

As a threat of a bank run looms at Silicon Valley Bank, days after Silvergate’s meltdown and impending shutdown and Signature Bank’s ongoing step back from crypto customers, Pham has found himself in “the nuttiest week ever.”

Series, which offers corporate bank accounts, is getting inundated with inbound messages, and entire portfolios of VC firms — and the pace of inbound is ramping up by the hour.

The CEO says their inbox is like a second application portal.

And despite the idea that competitors might have a field day with the spotlight, Pham is cautious, saying that Series is only onboarding “select startups” while other startups may run the risk of being too risk tolerant with compliance to speed up onboarding processes.

“If [you’re a] YC-backed neo bank and you wanted to acquire all of the startup customers, today’s the day to do it,” Pham revealed recently. 

YCCEO Garry Tan told YC companies, according to an anonymous source, that “anytime you hear problems of solvency at a bank, and it can be deemed credible, you should take it seriously and prioritize the interests of your startup by not exposing yourself to more than $250,000 of exposure this year.”

“The problem is, that’s the easiest way to invite fraud and get kicked out of the banking ecosystems — there’s actually nothing stopping banks from onboarding people in five minutes,” even though the founder thinks it should take four to five days to do proper diligence.

The startup, which was originally going to launch publicly in Q3, has done more onboarding in the past day than in the past month.

“As someone who works in fintech, SVB is going to be fine. It’s SVB… I actually fully believe that they’re fine,” Pham said.

“It is in your best interest to just diversify and build redundancy with your banking partners and have multiple banking relationships.”

Still, Pham says that account opening applications have increased more than 10x in just the last 24 hours.

“Today’s volume is close to double yesterday’s, too, since we’re now seeing FRB migrations,” Pham said.

All competitors are hoping that they’re not just a place for startups to park idle cash, but also become a primary bank and help with integrating payroll and recurring payments.

While some are cautious, others are aggressive. 

YC-backed startup Arc CEO and co-founder Don Muir said that “this is a COVID moment for financial services,” as demand for digital banking gets accelerated. 

“This is a time where all of a sudden startup founders, CEOs, operators are scratching their heads and saying wait a minute, maybe my bank deposits are not as safe as I thought with a traditional bank,” Muir said.

“Maybe technology can actually provide a level of diversification of my deposit base that a traditional financial institution simply cannot compete with.”

Arc is helping software and API-driven companies deploy deposits “at the click of a button… it’s something that takes offline banks weeks to months to do,” Muir said.

The fintech started out offering upfront cash for recurring revenue but has since evolved to also offering digital banking services; Arc says it has received a ton of inbound since the news broke on Thursday.

Moreover, Silicon Valley Bank is now shut down by regulators.

“We’ve had a huge wave of tech companies at all stages — from seed to Series D — moving over to Arc over the last 24 hours,” Muir told TechCrunch.

In direct response to the SVB news, Arc has seen its backlog of deposits “more than double” to the tune of hundreds of millions of dollars, he said.

“All that is coming online today and Monday as wire transfers are processed,” he said, noting the caliber of startups coming to their stack.

Naturally, Muir claims that because most fintech such as Arc is not actual banks, they actually can serve as a safe harbour for companies and provide a more diversified banking experience.

“We can take all excess cash that is not FDIC-insured and spread it out across other financial institutions, SIP-insured funds, and directly into government securities,” he said.

And Mercury, a fintech company that has been focused on offering banking services to startups since 2019, also says it has received a lot of inbound interest.

Co-founder and CEO Immad Akhund recently revealed that Thursday and Friday “have definitely been busy days” and that the company is “focused on onboarding clients quickly and giving them the best customer experience.” 

The company last year began offering venture debt in a direct swing at Silicon Valley Bank.

At the time, it had 60,000 businesses on its platform.

Like a lot of fintech startups, Mercury — which is not a bank itself but a banking platform that offers FDIC-insured products through Choice and an Arkansas-based bank called Evolve Bank & Trust — has been vocal about its belief that bigger rivals like SVB are “cumbersome and don’t understand the changing expectations of its customers.” 

Meanwhile, Ben Verschuere, co-founder and chief investment officer of fintech Treasure, said his company has “seen a large inflow of deposits…to be allocated to safe government back securities.”

“Within hours we have seen more than a 25% increase in our AUM and an increase of more than 20% in terms of new account opening,” he said.

“We have also seen a 500% increase on our website.” And, Stephane Lintner, CEO/co-founder of Jiko, said his startup “has seen a major spike” in demand for its T-bills offering “as firms look to secure financial instruments like Treasury bills to park cash.”

Founderpath, a company that aims to help B2B SaaS founders grow their businesses without diluting ownership, said it is “getting inundated with tons of founder requests.”

“Many founders have millions stuck at SVB and need $500,000 to process payroll next week,” said founder Nathan Latka.

“We’re wiring short-term non-dilutive financing to many of these founders right now.

"No prepayment penalties once they want to pay us with their SVB funds – once they are released.” 

Over in Europe, sources say that “many” international startups who had SVB accounts because they raised money from U.S.

VCs have reportedly moved money to Revolut Business accounts and Wise Business accounts.