The collapse of Silicon Valley Bank, a firm popular with tech startups and investors, could have lingering effects on the digital health ecosystem as the sector adjusts to a slowing funding environment, said venture capital panelists at ViVE 2023.
Emily Melton, managing partner of Threshold, said institutions like SVB are important to encourage people to take risks on new innovation, a critical need for the healthcare space.
“We need everybody around the table – founders, venture capitalists and other kinds of infrastructure, of which banking is one – to be able to have that innovation, to bring those solutions to market. So I’m hopeful that new owners will be able to continue to do that,” she said. “One of the things I’m very fearful of is that we get into an environment where people are risked off and retreat right when we need people to be actually leaning in more now than ever.”
Ambar Bhattacharyya, managing director at Maverick Ventures, said one concern after SVB’s collapse is creating a banking monopoly. He argued the venture debt and banking market was competitive, but many companies moved their funds to large banks as SVB fell apart.
According to Kruze Consulting, an accounting firm that focuses on startups, about half of its clients that recently changed banks moved to JPMorgan Chase.
“The onus is on all of us to make sure that we set up an ecosystem that optimizes for entrepreneurs and founders, and not for the banking industry,” Bhattacharyya said.
Richard Mulry, president and CEO of Northwell Holdings, the venture arm of New York-based health system Northwell Health, said access to debt will be important going forward.
He said Northwell Holdings, which focuses on early-stage companies, may be more cautious, but they’ll continue to support new startups.
“There’s still a lot of available dollars out there. The better ideas, they have a little bit more scrutiny, but we still think they’re going to continue to move ahead,” he said.
In the wake of the SVB collapse, some pointed to venture capitalists themselves, arguing they fed the fire by encouraging their portfolio companies to pull their funds from the bank all at once.
Lee Shapiro, managing partner at 7wireVentures, said some VCs may have caused the outcome they feared because they were too focused on their own companies and not the ecosystem as a whole.
“Had we actually started to say, ‘Wait, let’s pause for a moment, let’s think about what we should be doing at this point in time collectively to help secure that bank and to actually make it stronger,’ we might have avoided some of the challenges that occurred,” he said.
Threshold’s Melton pointed to the role of Twitter, arguing some users were spreading information about SVB before companies and investors considered the consequences.
“Information is moving faster, but it is also less nuanced,” she said. “[…] How do we, in a volatile market, take information, but react thoughtfully versus quickly? This was one of those examples of information that was too fast being consumed, and actions were taken that had much bigger repercussions than anyone thought through.”