'It Was Like a Hurricane': Silicon Valley Bank Failure Sends Biotech, Climate Tech Industries Scrambling for New Funding

Nkarta Therapeutics, among a throng of biotech companies in South San Francisco, had $350 million in deposits and assets in Silicon Valley Bank.

But last Friday, after the bank failed, it suddenly had no access to those funds, said Paul Hastings, the company’s CEO.

“Oh, my goodness. It was like a hurricane of thoughts about what’s going to happen here,” he said.

Hastings said another bank that works with SVB was able to wire him money on Monday, just in time for Nkarta to make payroll the next day.

Nearly half of the country’s biotech and climate-technology companies, many of them headquartered in the Bay Area, banked with Silicon Valley Bank. Last year, SVB committed to investing at least $5 billion in the clean-tech industry.

But even as the FDIC quickly stepped in to guarantee deposits following the bank’s collapse, many companies have been scrambling to find new banks, open accounts and reorganize payroll systems.

Although Rob Chess, chair of Nektar, was deeply relieved the government stepped in, he pointed to another big problem many former SVB clients will undoubtedly face.

“Who are we going to negotiate with? Silicon Valley was both the most sophisticated and, frankly, the easiest to deal with, and they were the leaders of the field. So it removes a capital source for many companies,” Chess said.

To his point, SVB was widely known for incubating ambitious climate and biotech start-ups, and was a valuable resource for new companies looking for a bank willing to invest in innovative and somewhat risky ventures.

Peter Reinhardt, CEO of Charm Industrial, a carbon-removal company, said his company had millions of dollars in cash deposits at SVB, in addition to checking, savings and other accounts.

Reinhardt noted that although most SVB clients with remaining deposits in the bank were essentially “made whole by the FDIC,” it’s still unclear how SVB plans to address companies with large lines of debt offered by the bank in an effort to help start-ups build their assets.

“I think there’s some concern that it could have a ripple effect for any companies that are really reliant on these more complicated products than just deposits,” Reinhardt said. “I do think it’s probably more likely to affect hardware and climate-tech companies than software companies.”

He added that about 60% of community solar projects across the U.S. banked with SVB, and it remains unclear how those projects will be affected.

For Ryan Panchadsaram, an advisor at Kleiner Perkins, a major Silicon Valley venture capital fund that invests in climate-tech companies, SVB’s collapse means existing banks will have to fill the void when it comes to funding early stage companies that have unique ideas.

“Will [banks] help finance them? How do you give them a bit of venture debt to do the risky thing?” he said. “I think that’s what we’re all going to have to see together.”