Companies scramble to meet payroll, pay bills after SVB’s swift failure
Employees stand outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.
Justin Sullivan | Getty Images
The sudden collapse of Silicon Valley Bank has thousands of tech startups wondering what happens now to their millions of dollars in deposits, money market investments and outstanding loans.
Most importantly, they’re trying to figure how to pay their employees.
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“The number one question is, ‘How do you make payroll in the next couple days,'” said Ryan Gilbert, founder of venture firm Launchpad Capital. “No one has the answer.”
SVB, a 40-year-old bank that’s known for handling deposits and loans for thousands of tech startups in Silicon Valley and beyond, fell apart this week and was shut down by regulators in the largest bank failure since the financial crisis. The demise began late Wednesday, when SVB said it was selling $21 billion of securities at a loss and trying to raise money. It turned into an all-out panic by late Thursday, with the stock down 60% and tech executives racing to pull their funds.
While bank failures aren’t entirely uncommon, SVB is a unique beast. It was the 16th biggest bank by assets at the end of 2022, according to the Federal Reserve, with $209 billion in assets and over $175 billion in deposits.
However, unlike a typical brick-and-mortar bank — Chase, Bank of America or Wells Fargo — SVB is designed to serve businesses, with over half its loans to venture funds and private equity firms and 9% to early and growth-stage companies. Clients that turn to SVB for loans also tend to store their deposits with the bank.
The Federal Deposit Insurance Corporation, which became the receiver of SVB, insures $250,000 of deposits per client. Because SVB serves mostly businesses, those limits don’t mean much. As of December, roughly 95% of SVB’s deposits were uninsured, according to filings with the SEC.
The FDIC said in a press release that insured depositors will have access to their money by Monday morning.
But the process is much more convoluted for uninsured depositors. They’ll receive a dividend within a week covering an undetermined amount of their money and a “receivership certificate for the remaining amount of their uninsured funds.”
“As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors,” the regulator said. Typically, the FDIC would put the assets and liabilities in the hands of another bank, but in this case it created a separate institution, the Deposit Insurance National Bank of Santa Clara (DINB), to take care of insured deposits.
Clients with uninsured funds — anything over $250,000 — don’t know what to do. Gilbert said he’s advising portfolio companies individually, instead of sending out a mass email, because every situation is different. He said the universal concern is meeting payroll for March 15.
Gilbert is also a limited partner in over 50 venture funds. On Thursday, he received several messages from firms regarding capital calls, or the money that investors in the funds send in as transactions take place.
“I got emails saying saying don’t send money to SVB, and if you have let us know,” Gilbert said.
The concerns regarding payroll are more complex than just getting access to frozen funds, because many of those services are handled by third parties that were working with SVB.
Rippling, a back office-focused startup, handles payroll services for many tech companies. On Friday morning, the company sent a note to clients telling them that, because of the SVB news, it was moving “key elements of our payments infrastructure” to JPMorgan Chase.
“You need to inform your bank immediately about an important change to the way Rippling debits your account,” the memo said. “If you do not make this update, your payments, including payroll, will fail.”
Rippling CEO Parker Conrad said in a series of tweets on Friday that some payments are getting delayed amid the FDIC process.
“Our top priority is to get our customers’ employees paid as soon as we possibly can, and we’re working diligently toward that on all available channels, and trying to learn what the FDIC takeover means for today’s payments,” Conrad wrote.
One founder, who asked to remain anonymous, told CNBC that everyone is scrambling. He said he’s spoken with more than 30 other founders, and talked to a finance chief from a billion-dollar startup who has tried to move more than $45 million out of SVB to no avail. Another company with 250 employees told him that SVB has “all our cash.”
A SVB spokesperson pointed CNBC back to the FDIC’s statement when asked for comment.
‘Significant contagion risk’
For the FDIC, the immediate goal is to quell fears of systemic risk to the banking system, said Mark Wiliams, who teaches finance at Boston University. Williams is quite familiar with the topic as well as the history of SVB. He used to work as a bank regulator in San Francisco.
Williams said the FDIC has always tried to work swiftly and to make depositors whole, even if when the money is uninsured. And according to SVB’s audited financials, the bank has the cash available — its assets are greater than its liabilities — so there’s no apparent reason why clients shouldn’t be able to retrieve the bulk of their funds, he said.
“Bank regulators understand not moving quickly to make SVB’s uninsured depositors whole would unleash significant contagion risk to the broader banking system,” Williams said.
Treasury Secretary Janet Yellen on Friday met with leaders from the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency regarding the SVB meltdown. The Treasury Department said in a readout that Yellen “expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event.”
On the ground in Silicon Valley, the process has been far from smooth. Some execs told CNBC that, by sending in their wire transfer early on Thursday, they were able to successfully move their money. Others who took action later in the day are still waiting — in some cases, for millions of dollars — and are uncertain if they’ll be able to meet their near-term obligations.
Regardless of if and how quickly they’re able to get back up and running, companies are going to change how they think about their banking partners, said Matt Brezina, a partner at Ford Street Ventures and investor in startup bank Mercury.
Brezina said that after payroll, the biggest issue his companies face is accessing their debt facilities, particularly for those in financial technology and labor marketplaces.
“Companies are going to end up diversifying their bank accounts much more coming out of this,” Brezina said. “This is causing a lot of pain and headaches for lots of founders right now. And it’s going to hit their employees and customers too.”
SVB’s rapid failure could also serve as a wakeup call to regulators when it comes to dealing with banks that are heavily concentrated in a particular industry, Williams said. He said that SVB has always been overexposed to tech even though it managed to survive the dot-com crash and financial crisis.
In its mid-quarter update, which began the downward spiral on Wednesday, SVB said it was selling securities at a loss and raising capital because startup clients were continuing to burn cash at a rapid clip despite the ongoing slump in fundraising. That meant SVB was struggling to maintain the necessary level of deposits.
Rather than sticking with SVB, startups saw the news as troublesome and decided to rush for the exits, a swarm that gained strength as VCs instructed portfolio companies to get their money out. Williams said SVB’s risk profile was always a concern.
“It’s a concentrated bet on an industry that it’s going to do well,” Williams said. “The liquidity event would not have occurred if they weren’t so concentrated in their deposit base.”
SVB was started in 1983 and, according to its written history, was conceived by co-founders Bill Biggerstaff and Robert Medearis over a poker game. Williams said that story is now more appropriate than ever.
“It started as the result of a poker game,” Williams said. “And that’s kind of how it ended.”
— CNBC’s Lora Kolodny, Ashley Capoot and Rohan Goswami contributed to this report.
OpenAI CEO Sam Altman visits “Making Money With Charles Payne” at Fox Business Network Studios in New York on Dec. 4, 2024.
Mike Coppola | Getty Images
OpenAI CEO Sam Altman’s sister, Ann Altman, filed a lawsuit on Monday, alleging that her brother sexually abused her regularly between the years of 1997 and 2006.
The lawsuit, which was filed in U.S. District Court in the Eastern District of Missouri, alleges that the abuse took place at the family’s home in Clayton, Missouri, and began when Ann, who goes by Annie, was three and Sam was 12. The filing claims that the abusive activities took place “several times per week,” beginning with oral sex and later involving penetration.
The lawsuit claims that “as a direct and proximate result of the foregoing acts of sexual assault,” the plaintiff has experienced “severe emotional distress, mental anguish, and depression, which is expected to continue into the future.”
The younger Altman has publicly made similar sexual assault allegations against her brother in the past on platforms like X, but this is the first time she’s taken him to court. She’s being represented by Ryan Mahoney, whose Illinois-based firm specializes in matters including sexual assault and harassment.
The lawsuit requests a jury trial and damages in excess of $75,000.
In a joint statement on X with his mother, Connie, and his brothers Jack and Max, Sam Altman denied the allegations.
“Annie has made deeply hurtful and entirely untrue claims about our family, and especially Sam,” the statement said. “We’ve chosen not to respond publicly, out of respect for her privacy and our own. However, she has now taken legal action against Sam, and we feel we have no choice but to address this.”
Their response says “all of these claims are utterly untrue,” adding that “this situation causes immense pain to our entire family.” They said that Ann Altman faces “mental health challenges” and “refuses conventional treatment and lashes out at family members who are genuinely trying to help.”
Sam Altman has gained international prominence since OpenAI’s debut of the artificial intelligence chatbot ChatGPT in November 2022. Backed by Microsoft, the company was most recently valued at $157 billion, with funding coming from Thrive Capital, chipmaker Nvidia, SoftBank and others.
Altman was briefly ousted from the CEO role by OpenAI’s board in November 2023, but was quickly reinstated due to pressure from investors and employees.
This isn’t the only lawsuit the tech exec faces.
In March, Tesla and SpaceX CEO Elon Musk sued OpenAI and co-founders Altman and Greg Brockman, alleging breach of contract and fiduciary duty. Musk, who now runs a competing AI startup, xAI, was a co-founder of OpenAI when it began as a nonprofit in 2015. Musk left the board in 2018 and has publicly criticized OpenAI for allegedly abandoning its original mission.
Musk is suing to keep OpenAI from turning into a for-profit company. In June, Musk withdrew the original complaint filed in a San Francisco state court and later refiled in federal court.
Last month, OpenAI clapped back against Musk, claiming in a blog post that in 2017 Musk “not only wanted, but actually created, a for-profit” to serve as the company’s proposed new structure.
Technology
Meta employees criticize Zuckerberg decisions to end fact-checking, add Dana White to board
This photo illustration created on January 7, 2025, in Washington, DC, shows an image of Mark Zuckerberg, CEO of Meta, and an image of the Meta logo.
Drew Angerer | Afp | Getty Images
Meta employees took to their internal forum on Tuesday, criticizing the company’s decision to end third-party fact-checking on its services two weeks before President-elect Donald Trump’s inauguration.
Company employees voiced their concern after Joel Kaplan, Meta’s new chief global affairs officer and former White House deputy chief of staff under former President George W. Bush, announced the content policy changes on Workplace, the in-house communications tool.
“We’re optimistic that these changes help us return to that fundamental commitment to free expression,” Kaplan wrote in the post, which was reviewed by CNBC.
The content policy announcement follows a string of decisions that appear targeted to appease the incoming administration. On Monday, Meta added new members to its board, including UFC CEO Dana White, a longtime friend of Trump, and the company confirmed last month that it was contributing $1 million to Trump’s inauguration.
Among the latest changes, Kaplan announced that Meta will scrap its fact-checking program and shift to a user-generated system like X’s Community Notes. Kaplan, who took over his new role last week, also said that Meta will lift restrictions on certain topics and focus its enforcement on illegal and high-severity violations while giving users “a more personalized approach to political content.”
One worker wrote they were “extremely concerned” about the decision, saying it appears Meta is “sending a bigger, stronger message to people that facts no longer matter, and conflating that with a victory for free speech.”
Another employee commented that by “simply absolving ourselves from the duty to at least try to create a safe and respective platform is a really sad direction to take.” Other comments expressed concern about the impact the policy change could have on the discourse around topics like immigration, gender identity and gender, which, according to one employee, could result in an “influx of racist and transphobic content.”
A separate employee said they were scared that “we’re entering into really dangerous territory by paving the way for the further spread of misinformation.”
The changes weren’t universally criticized, as some Meta workers congratulated the company’s decision to end third-party fact checking. One wrote that X’s Community Notes feature has “proven to be a much better representation of the ground truth.”
Another employee commented that the company should “provide an accounting of the worst outcomes of the early years” that necessitated the creation of a third-party fact-checking program and whether the new policies would prevent the same type of fall out from happening again.
As part of the company’s massive layoffs in 2023, Meta also scrapped an internal fact-checking project, CNBC reported. That project would have let third-party fact checkers like the Associated Press and Reuters, in addition to credible experts, comment on flagged articles in order to verify the content.
Although Meta announced the end of its fact-checking program on Tuesday, the company had already been pulling it back. In September, a spokesperson for the AP told CNBC that the news agency’s “fact-checking agreement with Meta ended back in January” 2024.
Dana White, CEO of the Ultimate Fighting Championship gestures as he speaks during a rally for Republican presidential nominee and former U.S. President Donald Trump at Madison Square Garden, in New York, U.S., Oct. 27, 2024.
Andrew Kelly | Reuters
After the announcement of White’s addition to the board on Monday, employees also posted criticism, questions and jokes on Workplace, according to posts reviewed by CNBC.
White, who has led UFC since 2001, became embroiled in controversy in 2023 after a video published by TMZ showed him slapping his wife at a New Year’s Eve party in Mexico. White issued a public apology, and his wife, Anne White, issued a statement to TMZ, calling it an isolated incident.
Commenters on Workplace made jokes asking whether performance reviews would now involve mixed martial arts style fights.
In addition to White, John Elkann, the CEO of Italian auto holding company Exor, was named to Meta’s board.
Some employees asked what value autos and entertainment executives could bring to Meta, and whether White’s addition reflects the company’s values. One post suggested the new board appointments would help with political alliances that could be valuable but could also change the company culture in unintended or unwanted ways.
Comments in Workplace alluding to White’s personal history were flagged and removed from the discussion, according to posts from the internal app read by CNBC.
An employee who said he was with Meta’s Internal Community Relations team, posted a reminder to Workplace about the company’s “community engagement expectations” policy, or CEE, for using the platform.
“Multiple comments have been flagged by the community for review,” the employee posted. “It’s important that we maintain a respectful work environment where people can do their best work.”
The internal community relations team member added that “insulting, criticizing, or antagonizing our colleagues or Board members is not aligned with the CEE.”
Several workers responded to that note saying that even respectful posts, if critical, had been removed, amounting to a corporate form of censorship.
One worker said that because critical comments were being removed, the person wanted to voice support for “women and all voices.”
Meta declined to comment.
— CNBC’s Salvador Rodriguez contributed to this report.
WATCH: Meta adds Dana White, John Elkann, and Charlie Songhurst to board of directors.
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