Isa Watson, founder of voice-only social messaging app Squad, was on a plane when she got the news: Silicon Valley Bank had collapsed, and the Federal Deposit Insurance Corporation had taken over.
Prior to the crash, Watson was a depositor at Silicon Valley Bank, using it as the primary bank for all of her business expenses, including cloud services, databases and products that her developers and designers use to collaborate.
By Friday, March 10, regulators shuttered the bank and seized its deposits in what would become the largest U.S. bank failure since the 2008 financial crisis and the second-largest bank failure in U.S. history.
Although Watson’s line of credit with SVB was still open on Friday, on Saturday, March 11, she noticed an email stating that payment for one of the services her business uses had failed. “I’m like ‘holy crap, the card doesn’t work anymore,'” the 35-year-old tells CNBC Make It.
At that point, Watson says she didn’t know whether she’d be able to get her business’s money back beyond the FDIC-insured $250,000. She put thousands of dollars’ worth of business charges on her personal credit card to keep things running smoothly.
“For the whole weekend, it was just agony,” she says.
By Sunday, March 12, the country’s top financial regulators announced that the FDIC and Federal Reserve would fully cover deposits at SVB, and assured the shuttered bank’s customers that they would be able to access their funds the following Monday.
SVB went ‘above and beyond’ typical banking services
In the wake of the collapse, Watson noticed that the Black startup founders she knows who banked with SVB reacted differently than non-Black founders.
While her non-Black founder friends were already switching to larger firms, many of the Black founders Watson knows tended to be more distraught over SVB’s crash.
SVB was known to support founders from diverse backgrounds in a big way. The bank helped sponsor pitch competitions for Black-led startups and partnered with BLKVC to develop the non-profit’s State of Black Venture Report.
“This is so sad,” Watson recalls a fellow Black founder telling her following the bank’s failure. “You know how it is for us. You know we don’t really find people that back us up like that in a big way.”
To Watson, SVB was more like a business partner than a bank. In the five years she banked with SVB, the firm went “above and beyond” to help her business succeed, she says, from ensuring front row seats at industry events where she could meet investors to getting her in front of users in her company’s target demographic.
Watson has since gained access to her SVB account and transferred the majority of her funds into another bank. However, she knows establishing a new business relationship won’t be easy, especially as a Black founder.
Only about 16% of companies led by Black people received the full amount of the business financing they sought from banks in 2021, according to the Federal Reserve’s 2022 Small Business Credit Survey. And Black founders tend to receive an even smaller share of venture capital funding.
Overall, Black entrepreneurs typically receive less than 2% of all venture capital dollars each year, according to data from Crunchbase. For companies led by Black women, it drops to less than 1%.
“It took me about two years and 400 no’s for the first VC to take me seriously,” Watson says.
Although SVB’s new CEO Tim Mayopoulos says the newly renamed Silicon Valley Bridge Bank is “open for business” and ready to rebuild, Watson is skeptical. She says it will take time to decide whether to return fully to SVB or to diversify her business banking partners moving forward.
For now, she’s emotionally exhausted: “Too much has happened. It’s kind of like a bad break up.”
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