Venture capital firms and founders of digital health companies are gathering the pieces after a hectic few days involving the failure of the Silicon Valley Bank.
“We had all our money at Silicon Valley Bank. They are our full banking partners,” said Ellen DaSilva, CEO and founder of Summer Health, a messaging-based pediatric care provider. “When I started the company, I wanted to say that everyone in my life sent money to SVB as well.”
Related: Digital Wellbeing Could Be Reset After Silicon Valley Bank Crash
The popular bank for digital health companies and venture capital firms was taken over by the Federal Deposit Insurance Corporation on Friday following a flight of depositors. On Sunday, the Treasury Department, Federal Reserve and FDIC said the government would fully protect all Silicon Valley Bank depositors. On Monday, the FDIC transferred all assets from Silicon Valley Bank to its bridge bank, Silicon Valley Bank, NA.
On its website, SVB says it has $78.8 billion in deposits and investments in the healthcare sector as of December and has worked on 76% of related IPOs. health care as of 2020.
“I don’t know if I know a single founder that I am friends with,” said Ashley Tyrner, CEO and founder of FarmboxRx, a home health and food delivery service. company.
Tyrner said about 14% of FarmboxRx’s funds are held at SVB, a large portion of which is venture debt.
“We create relationships there because the big banks, like the BE[ank] him[merica] [and] Wells Fargo, they don’t want recognition. They are not founder-friendly,” Tyrner said. “So really, it’s the path of least resistance.”
While the short-term concerns of the digital health industry, such as the ability to pay employees and suppliers, have been addressed, there is still uncertainty about how the industry will weather. bank failure. Industry stakeholders say that while the episode highlighted the importance of banking diversification, an institution like the Silicon Valley Bank is still needed to fund digital health innovators digital.
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Hemant Taneja, CEO of venture capital firm General Catalyst, said he would like to see Silicon Valley Bank return in some form. He led an effort by more than 100 venture capitalists to sign a letter in support of SVB, saying they would do business with it if it reborn.
“We need a bank like the Silicon Valley Bank that understands how to help these innovation-driven companies thrive and become an important part of the ecosystem,” said Taneja.
But Taneja is also telling portfolio companies to diversify and deposit their money in several banks instead of relying on one.
Many digital health firms say banking with SVB is often the path of least resistance as it is recommended by venture capital firms and peer-to-peer firms. However, the attraction quickly faded as banks reported more and more losses.
DaSilva said at Summer Health, contingency conversations took place in the days leading up to the bank’s closure. While the company did not need to take those measures, DaSilva said its three largest joint venture partners have supported and offered to assist.
Likewise, Taneja says that before the federal government stepped in, he put together loan documents to help fund dozens of clients in the company’s portfolio. With relief in hand, he said the industry could return to the job of disrupting healthcare operations.
“It was a brighter Monday than we prepared for yesterday,” said Taneja.
This story first appeared in Digital Health Business & Technology.
