Nearly 50 percent of all US startups had their deposits in Silicon Valley Bank

While venture capital firms and tech startups are relieved that the U.S. government stepped in to fully protect their deposits at Silicon Valley Bank (SVB), the collapse will have far-reaching implications on U.S. venture-backed startups and the broader tech ecosystem for many years to come. Even after the US regulators took over the bank, industry experts are saying that we’re not out of the woods yet.

Founded in 1983, SVB was the US’s 16th largest bank that served mostly venture capital firms and tech companies, and startups, including some of Silicon Valley’s biggest names, such as Roku. SVB’s collapse is the largest U.S. bank failure since the 2009 financial crisis.

With over 200 billion dollars of assets, Silicon Valley Bank is heavily focused on the tech industry having funded early-stage startups including Airbnb, Uber, Square, and others. Before its downfall, half of U.S. venture-backed startups did business at the bank.

In addition, more than 60 YC-backed Indian startups also had more than $250,000 stuck in accounts with Silicon Valley Bank and nearly two dozen Indian startups have over $1 million tied with SVB, according to a report from TechCrunch, citing a survey by and among the startups. As of the time of writing, US regulators still haven’t allowed withdrawal outside the United States.

Silicon Valley Bank’s downward spiral began late Wednesday after the bank surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. This news quickly caused SVB’s share price to lose more than 60 percent of its value the next day and another 60 in the aftermarket.

The sudden collapse of Silicon Valley Bank (SVB) sent panic waves to thousands of startups and venture capital firms. Surprisingly, the panic was caused by the very venture capital community that SVB was created to serve and cared for.

Then on Friday, venture capital firms urged tech startups and companies in their portfolio companies to move money out of embattled lender Silicon Valley Bank. The same day, the trading of SVB Financial Group’s shares, the holding company of Silicon Valley Bank, was suspended due to a significant drop in the pre-market session. The bank was in a rush to raise new funds amid this steep decline.

For many startups and venture capital firms, the move by the US government addresses a looming cash crunch.

“I’m just relieved that folks will make payroll tomorrow and have no regrets about all the work and contingencies everyone put in place in case the Fed didn’t come through,” said Aviel Ginzburg, general partner at Seattle VC firm Founders’ Co-op, shortly after the news was announced.

Below is a detailed video of how it all happened.