Silicon Valley Bank and Beyond: What You Need to Know
The past week saw the rapid collapse of Santa Clara, CA-based Silicon Valley Bank, a major source of funding for technology startups. It was followed by the teetering of New York City-based Signature Bank. In light of this crisis — and the federal government’s response guaranteeing deposits over the FDIC limit of $250,000 at both banks, HT checked in with industry experts for their insights into how the evolving situation may affect tech startups and the industry at large.
A Time of Uncertainty
“I think the impacts of the bank failure are going to be unknown for quite some time,” says Zerrick Pearson, CIO, Five Guys. “I think there may be smaller startups that have to pause or curtail their development for some period of time, but I think it’s just temporary. I think those with institutional investors will find other means to fund their operations. Those that solely rely on private equity, may have a much harder road ahead.”
“This collapse has sent shockwaves through the entire industry,” agrees Tom Seeker, CIO, Earl Enterprises. “I think some startups moving forward are going to have a difficult time getting funding. Even though the government is guaranteeing the deposits, it can’t guarantee how people are going to respond.”
I also caught up with Benson Tsai, CEO & Co-Founder of the robotics-powered mobile restaurant concept Stellar Pizza, for his perspective as a startup. “Startups and restaurants face existential threats fairly regularly,” Tsai observes. “The benefit to this is that this crisis forces founders to focus on what really matters. Over the weekend, I took a fine-tooth comb through the entire business to figure out what was essential to company survival. The review process allowed us to understand what was important to focus on and where to reallocate resources for highest impact. My advice to others is to do the same and look at where there are inefficiencies in your business.”
A Tightening of Tech Startup Funding
Unfortunately, tightening of startup funding would most adversely impact some of the most promising areas of restaurant technology, notes Skip Kimpel, Principal of Independent & SMB Consulting, ConStrata Consulting. “The biggest impact could be in the area of new startup investments such as robotics, AI, online ordering systems, food delivery tech, really, the list is endless,” says Kimpel, who spoke with HT and also shared his thoughts in greater detail on LinkedIn. “The collapse of a major bank can have significant ripple effects throughout the economy, including economic instability and uncertainty, as investors and consumers may lose confidence in the financial system; market volatility; a contraction in credit; and job losses among businesses that rely on the bank for financing.”
“The timing of this banking collapse could not have been worse,” notes Tamy Duplantis, CIO, Digital Architect, Return on Information Consulting. “We’ve seen pent-up investments unleashed — as was evident at MURTEC, with new startup solutions as well as legacy vendors expanding their platforms through new development and acquisition. The tech startups I am working with are already operating on tight budgets, but will likely need to secure more early-adopter pilot partners to accelerate their revenue streams to offset potential lost funding.”
What Do You Think?
Whether the collapse of Silicon Valley Bank triggers a “contagion” or remains under control remains to be seen. HT, as always, will continue to report on tech startups that power innovation at hotels and restaurants as they adjust to this evolving landscape.
We will continue to add commentary to this article as industry experts weigh in. And we welcome your input. My digital door is always open at [email protected].