Silicon Valley Bank may be back in business after its collapse, but the bank's failure left jitters in its wake that upended the start-up community for the foreseeable future.
While venture capitalists and startups are still reeling from the meltdown of their favorite lender, one investor believes the community will likely benefit from this major upheaval in the long term.
Jai Das, partner and co-founder of Sapphire Ventures, says roughly one third of his portfolio companies had funds in SVB when the bank was seized by regulators on March 10.
In an interview with FOX Business, he recalled how the VC community scrambled that weekend to be sure impacted startups would be able to meet payroll on Monday before U.S. banking regulators announced a plan to make uninsured depositors whole.
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Without access to their SVB deposits, some CEOs were planning to personally fund their own ventures, VCs were alerting their bankers from other institutions that they might need to wire significant funds to save portfolio companies, and firms emerged offering quick debt extensions to impacted startups.
Das says it will be interesting to see how the landscape changes now that money is flowing again, but "just like anything, there's always an opportunity."
For instance, SVB left thousands of companies rattled by the fact that their deposits above $250,000 were not insured by the Federal Deposit Insurance Corporation. But in the aftermath of the collapse, financial technology firms were already offering products that divvy up company's funds in $250,000 chunks into different banks.
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Das has been investing a long time and has seen major disruptions in the past where large parts of the ecosystem disappeared. He points to the dot-com bubble bursting in 2000 and to the Great Recession.
While Das acknowledges that the cost of capital will go way up in the aftermath of the SVB fallout just like in those past crises, he believes the U.S. economy and the tech industry will be strong enough to handle the current banking chaos, too.
"Entrepreneurs will still build businesses, I think they just build more efficient businesses," Das told FOX Business. "So that's the silver lining. There's going to be short term pain, but long term I think it's good for the ecosystem."
He said some of his CEOs have asked him why he is taking such a positive outlook on the situation, when so many could not sleep the entire weekend following the SVB collapse as they feared for their businesses.
"But overall, they're going to make decisions that are more appropriate" moving forward, Das said. "Because people are already deciding or figuring out, 'Hey, I'm not going to have this debt available for me. What do I need to make my business go and keep going?'"
