Silicon Valley Bank failure could shake Colorado startup scene; bankers say damage contained

In what felt like a flashback to 2008, Silicon Valley Bank collapsed Friday after a run on its deposits by venture capital firms, sending shockwaves through the financial sector and startup communities across the country, members of which rely on the Santa Clara, California-based institution for financing. 

In Colorado — particularly in startup-centric markets such as Boulder, where SVB tends to have client clusters — business leaders are sending out the call to circle the wagons, while the state’s top industry group is urging calm.

“Silicon Valley Bank has strong connections in our startup and entrepreneurial community, particularly in the tech sector. We know that businesses are just now digesting this news, but we imagine that there will be impacts to their operations and stakeholders,” Boulder Chamber president John Tayer told BizWest. “We at the Boulder Chamber are working to help them identify support resources that will allow them to bridge through this situation.”

Other banks will need to fill the void left by SVB, he said, but expects local startups and financial institutions to demonstrate resilience. 

Colorado Bankers Association president Jenifer Waller told BizWest that she does not expect negative impacts from the SVB collapse to spill over into the broader Colorado banking sector. 

“Silicon Valley Bank was unique in that it had a concentration of tech and venture capital clients.  Banks do not generally have significant concentrations,” she said in an email. “A concentration would make a bank susceptible to market shifts that impact whatever industry in which they have a concentration.”

Centennial State banks have a strong capital position, high-quality loans, healthy liquidity and low delinquency rates, Waller said. 

Community banks don’t have the same type of exposure to the whims of venture capital, cryptocurrency or risky startups as SVB did, experts say.

“We’re geographically and industry-type diversified,” Bank of Colorado President Shawn Osthoff said, “as are most of the other community banks in this area. We have a strong stable balance sheet and consistent earnings.”

Colorado community banks have “very good assets portfolios and good loans that are performing,” he said. “There are really no asset-quality issues as you look around the state. The community banks in Colorado certainly do not have the same balance-street structure or makeup as some of these banks you read about, such as SVB.”

Waller assured local depositors that they “can be confident that their funds are safe and secure.”

SVB customers, particularly those with large deposit totals, are likely not feeling very confident. 

The Federal Deposit Insurance Corp., which has stepped in to serve SVB’s receiver, insures accounts up to $250,000, but it’s unclear whether account holders with larger balances will get repaid and whether that repayment will be in full. 

Silicon Valley Bank’s collapse represents the largest American bank failure since Washington Mutual went under in 2008.

In an effort to compete with larger institutions, SVB, according to media reports, offered higher interest rates on deposits and took a lax approach to commercial lending.

When the bank, which has an office in Denver, and has operated in Boulder and Broomfield throughout the years, announced it was taking emergency fundraising measures this week to avoid collapse, a run on its deposits began and SVB didn’t have the cash to pay out the withdrawals. 

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