When First Republic Bank was in its final moments, Silicon Valley didn’t shake or froth in a social media frenzy.
Instead of the panic that swept through 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 placed into FDIC receivership so that its assets could be sold to a bidder.
As startups scrape together new money management plans, tired of banking and stressed by the recession, they discover that a gap has been created by the collapse of these venture-friendly institutions.
Marisa Ricciardi, founder and CEO of marketing agency The Ricciardi Group, questioned whether the two bank failures meant the “death of relationship banking for small businesses.”
“With FR being Chase and SVB essentially non-existent, what good options are there for founders?” asked Ricciardi. “Which bank will [let me] actually have bankers’ cell phones that will answer day and night? Which bank will give a founder a loan to put their kids in school or 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 ecosystem of founders and small businesses that no one can fill right now. As a result, entrepreneurship is stifled in a meaningful way for a while. It will be interesting to see who emerges as a small business and growth bank.”
Hustle Fund co-founder and general partner Eric Bahn has used First Republic Bank as the company’s bank for the past six years. He describes it as “one of those canonical institutions when you’re an up-and-coming manager.”
“Just a few months ago, there were only two options for banks to partner with: Silicon Valley Bank or First Republic Bank,” he said.
While he’s happy that JPMorgan stepped in to buy First Republic, he’s less than happy that one of the world’s largest banks ended up being the buyer. “I think we’ve lost something big here, and my only hope is that JPMorgan respects the brand and customer service [FRB] has spent decades building.”
“I was hoping it would be PNC,” Bahn said, referring to the Pittsburgh-based bank reportedly one of the bidders for FRB. “I thought it would be nice to see another slightly smaller bank win to consolidate and maybe strengthen this position for itself to compete with the bigger banks.”