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Boston’s tech, life science, and nonprofit communities hail SVB rescue, but worries persist

Business leaders call the bank’s failure a ‘huge loss for the startup ecosystem’

The line started early at the Silicon Valley Bank branch Monday in Wellesley.David L. Ryan/Globe Staff

A wide swath of businesses in Greater Boston moved to get their finances in order on Monday after federal regulators freed their deposits at Silicon Valley Bank, the failed California institution known for its services to startups, investors, and nonprofits, including many based here.

Business leaders across technology, life sciences, housing, and education opened new accounts, scrambled to move funds, and investigated whether their loans would be affected by the abrupt closure of SVB. And concerns remain about financial problems spreading to other banks, many of which saw their stock value drop Monday, even as President Biden sought to reassure the public that the banking system is safe.


Over the weekend, hundreds of companies and their investors scrambled to make arrangements after the Federal Deposit Insurance Corp. took control of SVB on Friday and said customers would be able to access only up to $250,000 per account. But Sunday evening, the Treasury Department, Federal Reserve, and FDIC said customers would be able to access all funds starting Monday.

“Everyone in the tech community breathed a huge sigh of relief,” said Micah Remley, chief executive of Boston startup Robin, focused on workplace scheduling, which banked with SVB and several other banks. “We’re still working through it — it’s not totally over — but there’s light at the end of the tunnel.”

With regulators allowing companies to access their full deposits, customers have been opening accounts at other banks and moving their funds freely.

Katie Rae, chief executive of MIT-affiliated investing firm The Engine, was still filling out paperwork Monday afternoon to move funds from SVB to JP Morgan. She and her staff advised The Engine’s startups over the weekend and also tried to send information out to the wider community.

“You can think, ‘I don’t bank with SVB so I’m fine,’ but it’s just not true,” she said. “These systems are interconnected.”


The risks to the business community go beyond the now-averted cash crunch. SVB supported startups through lending, research, and other promotional activities, in addition to helping the companies raise money from investors.

SVB has been a “stellar partner” for startups, said Dave Balter, chief executive of investment firm Flipside Crypto. The bank was willing to lend to small companies when others would not. He called the situation a “huge loss for the startup ecosystem.”

Many startups got loans from SVB and then, by the terms of the loan, were required to keep all of their cash with the bank, which was a hidden risk building up in the tech ecosystem, said Christopher Ahlberg, chief executive of Somerville cybersecurity startup Recorded Future.

Christopher Ahlberg, founder and CEO of Recorded Future, poses for a portrait at his facility in Somerville on June 30, 2021. Craig F. Walker/Globe Staff

Startups will be more careful in the future, he predicted. “We will get this behind us and we’ll be talking about new products again soon.”

The crisis has been equally dire for biotechnology startups.

SVB was a “very longstanding bank that has served the innovation community very well,” said Jason Rhodes, a partner at Atlas Venture, one of the top backers of biotech startups in the state.

Over the weekend, Cambridge-based Atlas had drafted agreements with a couple dozen startups in its portfolio to extend short-term loans to make up for potentially frozen funds, Rhodes said.

VC firm Flagship Pioneering, whose best-known companies include Cambridge-based Moderna, also had deep banking relationships with SVB, spokeswoman Christine Heenan said. “Fortunately, we also had backup banking relationships and were heartened by the government’s announcement,” she said.


Even with the bold actions taken by regulators to shore up the system and seize SVB and two other institutions, customers and investors fear what could happen to other banks. Shares of First Republic, another California-based bank active with Boston businesses, plunged more than 60 percent on Monday.

Fernando Rodriguez-Villa, chief executive of Boston startup AdeptID and a First Republic customer, said he was reluctantly making contingency plans. He blamed panicked withdrawals for the crisis, rather than excessive risk-taking at the banks. “The main culprit here is the hysteria of the tech community rather than the systemic health of the financial system,” he said.

The fallout of SVB’s collapse is also rippling through the nonprofit world. Dozens of affordable-housing developers across the state have for years relied on loans and sponsorships from Boston Private Bank and Trust, which SVB acquired in 2021, to help finance projects. Nationwide, SVB has lent over $2.7 billion and made $1.3 billion of investments for new construction or rehabilitation of affordable housing, according to the bank.

“Boston Private has been a backbone of affordable housing development in our region,” said Kimberly Lyle, chief executive of the Dorchester Bay Economic Development Coalition. “It’s a scary moment for us.”

One of the biggest remaining questions is what will happen to loans that were still being processed or paid out for land purchases or construction. Another bank could buy those assets, but as of Monday afternoon, no buyer had emerged. The uncertainty could delay construction projects or require additional financing to launch certain projects.


Leslie Reid, chief executive of Madison Park Development Corp., had hoped to start construction by the end of the year on a 96-unit housing project with a range of income restrictions at 2085 Washington St., next to the Tropical Foods store in Roxbury. But now Reid is uncertain, because SVB was going to buy low-income housing tax credits for the project and help provide financing.Wendy Maeda

Leslie Reid, chief executive of Madison Park Development Corp., had hoped to start construction by the end of the year on a 96-unit housing project with a range of income restrictions at 2085 Washington St., next to the Tropical Foods store in Roxbury. But now Reid is uncertain, because SVB was going to buy low-income housing tax credits for the project and help provide financing. She said Madison Park may need to seek additional public subsidies.

“We’re in the unenviable situation of having to seek another investor, and maybe receiving less favorable terms,” Reid said. “We’re in the middle of a housing crisis and we’re trying to push housing production. … It just puts more pressure on the system and slows us down at the precise moment when we should be speeding up.”

Kevin Murray, interim executive director of the Massachusetts Association of Community Development Corporations, said he estimated roughly 10 to 20 CDCs in the state have current deals of varying sizes pending in which SVB is playing a central role.

Charter schools are among the other nonprofits most affected by SVB’s demise. Boston Private had long been a preferred banker for these schools, willing to take a chance on them when the sector was in its infancy here. As of last week, about a dozen charter schools in the state were believed to have relationships with SVB.


Among those is Excel Academy Charter Schools in East Boston and Chelsea. Owen Stearns, chief executive at Excel, said his schools had several loans outstanding and kept millions of dollars on deposit with SVB, including its main checking account.

The school withdrew most of its money from an SVB branch on Friday before the bank was shut down and carried the check to a nearby local bank. But Excel still had more than $1 million with SVB going into the weekend.

As a number of charter school operators gathered on a conference call Sunday to talk about their options, regulators announced their solution.

“You could feel the palpable relief,” Stearns said. “There was some crying.”

On Monday, Stearns was able to move most of the rest over to Bank of America. “I feel much better now,” Stearns said. “Our money at the end of the day is going toward teachers’ salaries and paying for outcomes for kids.”

Beyond startups and nonprofits, the crisis also hit individual customers of Boston Private Bank. SVB branches in Boston, Cambridge, Beverly, and Wellesley were closed Friday and reopened on Monday morning with the FDIC in charge.

Customers wait in line outside of a SVB Private branch in Wellesley, Mass., on March 13, 2023. Sophie Park/Bloomberg

In Wellesley, alongside busy commuter traffic on Route 16, a line of more than 40 people stretched across the SVB branch parking lot on Monday morning before the bank opened.

A man and a woman who identified themselves as representatives from the FDIC tried to reassure people in line that their funds were safe and they did not need to withdraw them immediately.

“It’s business as usual here,” one FDIC representative told a Globe reporter. He declined to give his name and referred questions to the FDIC’s communications office.

The representatives pointed out that all deposited funds are now backed by the government and could be accessed online or via the bank’s mobile app. They also mentioned the winter storm expected on Tuesday. “Given the weather forecast, if you come back tomorrow there might be no line,” one of the reps told waiting customers.

Not everyone was convinced. Daniel Snyder, a surgeon, said he came in person to move his personal accounts, including college funds. He said he was anxious despite the bailout.

“Nothing about the government is reassuring to me,” Snyder said.

SVB’s failure also impacted Boston’s biggest cryptocurrency firm. Circle Internet Financial’s USD Coin, or USDC, is backed dollar for dollar by assets held in Treasury bills and bank deposits. That’s supposed to ensure that each coin trades for $1.

But on Saturday, Circle disclosed that $3.3 billion of the $41 billion backing USDC, or 8 percent of the total assets, was deposited at SVB. That rattled investors, who traded almost 10 times the normal volume of USDC, sending its price as low as 88 cents. By Sunday, with the SVB situation improving, USDC traded back up to $1.

“It’s ironic that regulators have been worried that cryptocurrency risks would infect the banking system, and then the opposite happened,” Darrell Duffie, an economist at Stanford’s business school, said. “There will be significant work to do by regulators to see what went wrong.”

Globe correspondent Andrew Brinker and Jonathan Saltzman of the Globe staff contributed to this report.

Aaron Pressman can be reached at Follow him @ampressman. Jon Chesto can be reached at Follow him @jonchesto.