First Republic Banks was on the cusp, Silicon Valley didn’t panic or throw itself into a social media frenzy.
Instead of panic in the startup community when a Silicon Valley bank declared trouble in March, there was widespread malaise. Part of the reason for that may be that we’ve been here before, and part of the reason may be that the FRB had a quicker resolution than the SVB: earlier this week, the FRB was under FDIC receivership and its assets were put up for sale. Tender.
As startups weary of banking and the stress of the recession cancel new funding plans, they are finding that they are left with a loophole to fall through with these venture-friendly institutions.
Marisa Ricciardi, founder and CEO of marketing agency Ricciardi Group, hailed the two bank failures as “the death of relationship banking for small businesses.”
“Now that FR is Chase and SVB is basically non-existent, what are the best options for founders?” Richardi asked. “Which bank will it be. [let me] Do bankers who answer day or night have cell phones? Which bank would give a founder a loan to put their kids through school or buy a house and give them equity and options etc? It’s not just about these two banks, there’s a new void in the entire startup and small business ecosystem that no one can fill right now. Entrepreneurship will therefore be meaningfully inhibited for a period of time. It will be interesting to see who stands as the Small Business and Growth Bank.
Eric Bahn, founder and general partner of Hustle Fund, has used First Republic Bank as his firm’s bank for the past six years. He described it as “one of those canonical institutions where you become an emerging manager.”
“Just two months ago, there were only two banking options to work with, Silicon Valley Bank or First Republic Bank,” he said.
While JPMorgan is happy to have stepped in to buy First Republic, it is unhappy that one of the world’s largest banks has ended up as the buyer. “I think we’ve lost something big here, and my only hope is that JPMorgan honors its brand and customer service. [FRB] It took decades to build.
“I was hoping it would be PNC,” Bahn said, referring to the Pittsburgh-based bank that is said to be among the bidders for the FRB. “I thought it would be good to see another small bank win and maybe they can strengthen this position for themselves and compete with the big banks.”
