Startup founders are beginning to worry about whether they’ll be able to keep paying employees following the failure of Silicon Valley Bank.
(Bloomberg) — Startup founders are beginning to worry about whether they’ll be able to keep paying employees following the failure of Silicon Valley Bank.
Payroll service provider Rippling notified customers on Friday that some payroll processing had stalled because SVB helped process its payments. The company, a startup itself, switched to JPMorgan Chase, but not soon enough: Paychecks were already “in flight” with SVB and have yet to be paid out — and the firm is still trying to understand what the bank’s collapse on Friday will mean for them, Rippling Chief Executive Officer Parker Conrad said in a Twitter post.
Startup founder Brad Hargreaves said some firms may not be able to make payroll next week. And because boards are incredibly sensitive to employing workers they can’t pay, he said, “Expect mass layoffs later today, Monday at latest.”
Sarika Bajaj, the CEO of early-stage startup Refiberd, said she had been a customer of Silicon Valley Bank for three years and kept most of the company’s funds there. Bajaj, who was at the Sand Hill Road branch of SVB in California on Friday, tried to make withdrawals but couldn’t and is growing concerned about payroll for her and her two team members.
“I’m sure there are lots of people here with lots and lots of employees,” she said. “It’s not our reality, but I know it’s going to be a lot of people’s realities.”
More than half of tech companies “keep the lion’s share of their cash at SVB,” said Greg Martin, founding partner of the investment firm Liquid Stock. “They all need to make payroll early next week.”
Martin said he believes the bank is healthier than people think. But the worst-case scenario, he said, is “tens of thousands of people” don’t get paid next week.
(Updates with comments from CEO of startup in fourth paragraph)
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