Stefan Kalb was in the middle of a meeting around 1 p.m. on Thursday when a fellow company executive sent him a panicked Slack message: "Do you know what's happening at SVB?"
Kalb, the CEO and co-founder of Seattle-based food management startup Shelf Engine, had been following news of a bank run at Silicon Valley Bank, with droves attempting to pull out $42 billion from the bank on Thursday alone on fears that it was teetering on the brink.
The bank was on firm financial footing on Wednesday. The following day, it was under water.
For Shelf Engine, a 40-person startup founded in 2015 that uses artificial intelligence to help grocery stores reduce food waste, this was a major problem.
Not only did Silicon Valley Bank help the company process checks and payments, but all of the startup's cash was locked up in the bank.
Kalb sprung into action. He and his team quickly opened an account at JPMorgan Chase and attempted to wire transfer every last penny out of Silicon Valley Bank.
"Unfortunately, our wire was not honored and our money is still at Silicon Valley Bank," Kalb, 37, said in an interview on Friday. "We woke up this morning hoping the money would be in that JPMorgan bank account, and it was not."
While he declined to provide the exact amount, he noted that Shelf Engine has raised more than $60 million from investors. "It was a very large sum of money," he said of the transfer.
It is a nail-biting limbo state that many tech startups deeply entrenched in Silicon Valley Bank are now facing in the wake of the bank's implosion, the largest American bank failure since the 2008 financial crisis.
For tech startups, which for decades have relied heavily on the bank based in Santa Clara, Calif., it has set off a crisis that could lead to mass layoffs, or hundreds of startups collapsing, according to industry insiders.
"If the government doesn't step in, I think a whole generation of startups will be wiped off the planet," Garry Tan, president and CEO of the startup incubator Y Combinator, said in an interview.
While critics consider the idea of the government rescuing the bank a bailout for the tech and venture capital world, Tan argues that such a move would save depositors, many of which are small businesses in the tech sector.
Founded over a poker game in 1983, Silicon Valley Bank became the go-to lender for tech startups that appeared too risky in the eyes of larger, more traditional banks. Eventually, Silicon Valley Bank would come to do business with nearly half of all U.S. tech startups backed by venture capitalists.
"If you're a high-growth startup, you can't get a credit card from a normal credit card provider, you can't get a loan from a big bank, but Silicon Valley Bank would give you that," Shelf Engine's Kalb said. "It's these services that startups couldn't get elsewhere."
Silicon Valley Bank did business with well-known tech companies including Shopify, Pinterest, Fitbit and thousands of lesser-known startups, in addition to established venture capital firms, like Andreessen Horowitz.
Roku, the TV streaming provider, was among the companies caught in the middle to the tune of $487 million, it said in a regulator filing on Friday. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB," officials at Roku wrote of what amounts to about 26% of the company's cash.
Tan, with Y Combinator, which helped launch startups including Airbnb, Reddit and Instacart, said the biggest threat right now is not to the Rokus of the world, but rather to the scrappy startups that were already fighting to stay alive amid a challenging fundraising environment.
Startup leaders have been reaching out to him nonstop since Silicon Valley Bank failed with a sense of dread and fear — and increasingly confronting what could be inevitable layoffs, or even the end of their companies.
"Founders are texting me now and saying they don't know how to make payroll next week. Will they have to take out personal loans to keep the business running? Do they have to furlough workers?" Tan said. "This can be an existential risk to competition and innovation in the American economy for the next decade."
While most banking experts do not expect the fallout from Silicon Valley Bank's collapse to spread to other parts of the financial world, how much money depositors will be able to recoup remains an open question.
The Federal Deposit Insurance Corporation has said that depositors will be able to access up to $250,000 of their funds by Monday morning. Any amount above that will result in a "receivership certificate."
And when the FDIC sells the assets of Silicon Valley Bank, those with certificates will receive payments — but how long that will take, and what amount of money will be paid back, remains unclear.
According to Silicon Valley Bank filings, as little as about 4% of the bank's deposits are below $250,000, meaning the vast bulk of depositors have money that exceeds standard federal insurance.
Kalb said he is exploring debt financing, or other lines of credit, in order to survive.
Securing $250,000 from the FDIC would allow the startup to stay open for an additional several days, but not much longer.
He just paid his employees this week, and his next payroll deadline is March 20.
"If we don't have access to capital by then, we're going to have to make some very difficult decisions," he said.
The meltdown of one of Silicon Valley's cornerstone financial institutions could not have come at a worse time for the startup ecosystem, said Tan of Y Combinator.
High interest rates and market uncertainty has made lenders tighten the spigot on money, after many years of low interest rates and easy money sent valuations soaring.
Lately, entrepreneurs have been raising alarms about existing cash quickly evaporating, forcing thousands of startups to lay off workers or shutter altogether.
Into those bruising conditions comes the collapse of Silicon Valley Bank, considered a financial pillar of the startup world.
"Venture capital funding had already been in a contraction mode," Tan said. "So this is really a challenging time for something so devastating to happen."
