Wine, Skiing, and Loans: How Silicon Valley Bank Became Startups’ Best Friend

Generally, it offered among the least-restrictive terms and equally competitive interest rates, entrepreneurs say. If a borrower failed, SVB was known to handle it more gracefully than other lenders. Effectively, according to language seen by WIRED, SVB would support companies as long as their venture capital backers, often clients of the bank, did not abandon them. “Bankers become a lifeline when you get into trouble, and if they stand by you, I take that seriously,” says James of his loyalty to the now crushed bank. 

Roger Smith, SVB’s founding CEO, told the Computer History Museum in 2014 that the bank did not sacrifice profits by being flexible. “When the music stops, we want two chairs, not just one,” he said. “But we were able to help people grow and … we were part of the flow.”

Just ask Zbar, the former Sunbasket chief. He dreamed up the meal delivery company in 2013 after he had spent through the venture funding he had raised for a different idea. He had no money to pay back a bank loan. But his banker at SVB loved the Sunbasket pitch, and investors were supportive, so SVB agreed to allow Zbar to keep operating month-to-month on new terms as the food venture progressed.

“I remember having some unpleasant conversations where I was like, wow, you know, you took a piece of my hide, but my business still survived,” says Zbar, now chief executive of HamsaPay, which uses blockchain for commercial loan financing. He believes other banks are less flexible than SVB. “They just freeze it, and you're done,” he says.  Zbar even welcomed his SVB banker as a bachelor-party guest. 

To be sure, Silicon Valley Bank’s reliance on relationships and knowledge of venture capitalists to guide its lending decisions raises questions about whether it perpetuated exclusion of women, racial minorities, or other groups historically overlooked by the startup financing industry. Investors say some of those issues may be valid, but the bank did open up opportunities.

SVB fronted cash to people of underrepresented backgrounds trying to buy into venture capital funds, says the investor Craig, who runs Outlander VC. It provided home mortgages to investors early in their careers who couldn’t get them elsewhere, based on a deep understanding of the tech companies its customers were betting on, Craig says. “I really hope they rebuild and reconstitute. No one understood founders and innovators as well as SVB,” he says.  

As entrepreneurs have fanned out to other banks in recent days to shift their deposits from SVB, their experiences have reminded them of what they enjoyed about SVB. James’ Zefr has not found a single bank that can offer every service he wants, so he is using one to borrow money and another for conventional accounts. He does not expect Zefr’s growth to slow, but says his company “will have to suffer worse terms or take on a bit more risk.”

Gupta, who is chief technology officer of BonfireDAO, recalls how he was able to open an account with SVB entirely online while in Singapore at his previous startup a decade ago, an option he has not found as he now searches for SVB alternatives. “They were just the first one to really propose solutions,” he says of his early interactions with SVB. “I never shopped around again.”

He wrote on LinkedIn last week that “many startups like [his] have lost a valuable friend, partner, and source of support.” He says his heart wants to stick with SVB if it resurrects, but he’s no longer sure it’s financially prudent to do so, no matter the constant aid, invaluable discounts, or occasional free conference room.