When First Republic Bank was in its final moments, Silicon Valley didn’t convulse with shock or lather itself into a social media tizzy.
Instead of panic, which rippled throughout the startup community in March when Silicon Valley Bank signaled trouble, there was widespread malaise. Part of the reason for that may be that we’ve been here before, and part of the reason may be that FRB had a faster resolution than SVB: Earlier this week, FRB was officially put under FDIC receivership so its assets could be sold to a bidder.
As startups scrap together new money management plans, fatigued with banking and stressed by the downturn, they’re finding that a gap has been left behind by the collapse of these venture-friendly institutions.
Marisa Ricciardi, founder and CEO of marketing agency The Ricciardi Group, wondered if the two bank failures called for the “death of relationship banking for small businesses.”
“Now that FR is Chase and SVB essentially doesn’t exist, what good options are there for founders?” Ricciardi asked. “Which bank will [let me] actually have the cell phones of bankers who will answer day or night? Which bank will give a founder a loan to put their kids through school or to buy a house, and understand the value of equity and options, etc.? It’s not just about these two banks: It’s about a new gaping hole in the overall founder and small business ecosystem that no one at present is able to fill. Entrepreneurship will be stifled by this in a meaningful way for a period. It will be interesting to see who stands up as a small business and growth bank.”
Hustle Fund’s co-founder and general partner Eric Bahn has used First Republic Bank as the firm’s bank for the past six years. He describes it as “one of those canonical institutions when you’re an emerging manager.”
“Just a couple months ago, there were just two options of banks to work with: Silicon Valley Bank or First Republic Bank,” he said.
While he is happy that JPMorgan stepped in to buy First Republic, he’s not that happy that one of the world’s largest banks ended up being the buyer. “I think we lost something big here, and my only hope is that JPMorgan respects the brand and the customer service that [FRB] has spent decades to build.”
“I was hoping that it’d be PNC,” Bahn said, referring to the Pittsburgh-based bank that was said to be among the bidders for FRB. “I thought that it’d be nice to see another slightly smaller bank win to consolidate and maybe strengthen this position for themselves to compete with the larger banks.”