Venture capitalists and early-stage companies are increasingly turning to the government-supported Silicon Valley Bank for financial assistance.

As the government looks for someone to purchase it, Silicon Valley Bridge Bank has once again become popular among the tech industry's most prominent figures.

SANTA CLARA, CALIFORNIA - MARCH 10: Silicon Valley Bank (SVB) headquarters in Santa Clara, California. (Photo by Justin Sullivan/Getty Images)Getty Images

Amidst the shock of the run on the bank, Hemant Tanjea, CEO of venture firm General Catalyst, noticed something larger at play. He noticed that venture capitalists were focusing on individual companies and not thinking about what was right for the whole community. “There could have been millions not getting paid this week, and the already eroding trust in our industry would have gotten worse," he said. Tanjea's vision of putting the community first is a reminder that the success of individual companies is inextricably tied to the success of the community. His insight is a reminder of the power of collective action in times of crisis.

In a recent development, the implications of a new institution remain unclear. While the institution has garnered support, it is not certain that this support is directed towards the ultimate goal of the institution. This has caused a stir amongst the stakeholders, with many questioning the purpose of the institution and its potential implications.

The Federal Deposit Insurance Corporation (FDIC) was unable to secure a buyer for Silicon Valley Bridge Bank last weekend, leading the organization to focus on directing funds to the bank in an effort to attract a buyer. Anne Balcer, Chief of Government Relations and Public Policy for the Independent Community Bankers of America, clarified the purpose of the bridge bank. "The purpose of the bridge bank is intended to be a transition to either another buyer, while things get shored up, or essentially a wind down," Balcer said. This effort from the FDIC to provide financial aid to the bank could be an attempt to secure a buyer for the Silicon Valley Bridge Bank.

The bridge bank that recently acquired Silicon Valley Bank (SVB) is hoping to attract a strong deposit base in order to find a buyer that can offer similar services to those of SVB. The bank's services, which were beneficial to the venture capital and tech startup community, increased deposits from $55 billion in 2019 to $175 billion in 2022. At the end of the year, SVB's total assets were estimated at $209 billion. Replicating the bank's approach may prove to be a challenge, as SVB catered to startups who didn't always meet the minimum requirements of traditional commercial banks and lenders.

In a recent statement, Venture Capitalists (VCs) encouraged startups to spread their deposits over two or three accounts, including Silicon Valley Bank (SVB), as well as one of the United States' Big Four banks, such as JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), or CitiBank. VCs advised that the deposits be spread out among the accounts to ensure that the startups are well-prepared for any financial contingencies in the future.

In the wake of the recent banking panic, Silicon Valley Bank depositors who sought to move their funds to other institutions found themselves met with daunting obstacles. Those seeking to switch banks discovered that minimum deposits had been raised to as high as $20 million, a restriction that proves difficult for many. To make matters worse, the response times of these other banks have been slower than those experienced with the tech-savvy SVB. While these challenges are difficult to overcome, many are determined to find suitable alternatives.

Silicon Valley Bank is offering a unique option to early-stage startups—access to a credit line. With many banks requiring five or even 10 years of financial history for a debt applicant, Silicon Valley Bank is one of the few banks offering credit lines to startups. Silicon Valley Bank has been building relationships in the valley to assess the credit worthiness of startups and the reliability of their venture backers. The bank has been able to accurately predict when venture backers will step in with cash if needed, giving startups the financial support they need to succeed. The bank hopes that by offering credit lines to startups, they will be able to provide better client service experiences and help these businesses succeed.

Banks across the country have raised concerns regarding the manner of the rescue of Silicon Valley Bank (SVB) and Signature Bank, which both suffered a run on deposits. These two banks were supported by the U.S. Treasury, Federal Reserve, and FDIC after being defined as important to the financial system. Any losses incurred to support uninsured deposits at the two banks will be covered by the Deposit Insurance Fund, a fund used to cover losses when banks fail. Small banks, however, may not qualify for this same level of protection if they find themselves in financial difficulty. As the new SVB gathers deposits and faces the future, these worries linger among community banks.

The Independent Community Bankers of America (ICBA) recently voiced their opposition to an FDIC proposed 2 basis point increase in contributions for all banks. This proposed increase raised tensions for community banks and the FDIC, which had already been at odds over the Deposit Insurance Fund. In an effort to oppose the increase, the ICBA sent a letter to regulators in August outlining their argument that community banks pose less of a risk to the fund and would be disproportionately affected by the contribution increase. The ICBA stated that a "one size fits all" approach would not work, and that a more tailored approach is needed. The FDIC has yet to respond to the ICBA's letter, and the future of the Deposit Insurance Fund remains uncertain.