The co-founder and CEO of a direct-to-consumer children’s food company said he “dodged a bullet” in Silicon Valley Bank’s (SVB) shutdown last week but voiced worries about the impact the bank’s collapse might have on the startup and venture capital markets.
Ben Lewis, co-founder and CEO of Little Spoon, told FOX Business he quickly pulled his company’s funds out of SVB on Thursday – the day before the Federal Deposit Insurance Corporation (FDIC) seized control of the bank – to be “better safe than sorry” for his company, employees, investors and customers. He said he “went with [his] gut” and “decided within minutes” on Thursday morning.
“Fortunately, we were able to get the wire out,” he told FOX Business. “Unfortunately, we are definitely in the minority.”
While some companies were able to get their funds out prior to the bank’s shutdown, many other companies – either directly or indirectly – have felt impacts from SVB’s collapse. The bank was widely known for providing services to the startup and venture capital sectors.
SILICON VALLEY BANK COLLAPSE ROCKS START-UP COMMUNITY
Lewis told FOX Business there were “already some clouds looming” over the two markets before SVB’s collapse “given the recession and then just so many of the challenges that companies have faced, a lot of it driven by challenges in the public market,” and factors like inflation. At one point, he also noted that some have had difficulties raising funds, that valuations have been down and that reports have said the time between rounds has grown longer.
“In a situation where there’s already this kind of dark cloud over the market and hanging over so many companies and impacting negatively so many companies, I worry that this SVB situation, given how deeply entrenched they are in the market, is going to cast a very long and dark shadow over this space in a negative way,” he said.
Lewis said SVB’s collapse was “really too bad” because it was a “great bank to work with as a startup.” SVB “tried to be really helpful,” “make introductions to other founders and acted “very accommodating,” according to the Little Spoon CEO.
SILICON VALLEY BANK HIT WITH CLASS ACTION LAWSUIT FROM SHAREHOLDERS
He called the bank’s collapse a “loss” for startups and founders.
“I don’t know what’s going to happen, but, again, I know that it will cast a very dark shadow,” he told FOX Business. “I think, at a minimum, it’s fair to say that other banks are going to be skittish about working with startups, loaning money to startups, which is not the right conclusion to come to.”
He said he hoped the “philosophy and way of working” that SVB embodied “will somehow live on and get carried through to other banks, albeit with hopefully tighter controls to make sure that a situation like this never happens again.”
Little Spoon has raised over $90 million in venture capital funding to date, a figure Lewis said included a round the roughly five-year-old company recently closed.
SILICON VALLEY BANK COLLAPSE HITS COMPANIES SUCH AS CAMP, COMPASS COFFEE
SVB’s closure came after the bank earlier this week disclosed mounting losses and announced plans for a $1.25 billion stock sale with little interest.
On Sunday, the Treasury Department, Federal Reserve and FDIC indicated they would take steps that “fully protect all depositors” at SVB.
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer … shareholders and certain unsecured debtholders will not be protected,” the agencies jointly said.
Breck Dumas and Suzanne O’Halloran contributed to this report.