When the First Republic Bank was in its final moments, Silicon Valley did not convulse with shock or lather in social media jitters.
Instead of panic, which spread throughout the startup community in March when Silicon Valley Bank flagged problems, there was a general malaise. Part of the reason for this may be that we’ve been here before, and part of the reason may be that FRB had faster resolution than SVB: Earlier this week, FRB officially went under FDIC Receivership so its assets could be sold to a bidder.
As startups draw up new money management plans, bank-fatigued and recession-stressed, they find that the collapse of these business-friendly institutions has left a gap.
Marisa Ricciardi, founder and CEO of marketing agency The Ricciardi Group, wondered if the two bank failures caused 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. “That bank [let me] Do you really have the cell phones of bankers who will answer day or night? What bank will give a founder a loan so that his children can go to 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 hole in the overall ecosystem of founders and small businesses that no one today can fill. Entrepreneurship will be stifled by this in a significant way for a period. It will be interesting to see who stands out 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 emerging manager.”
“Just a couple of months ago, there were only two bank options to work with: Silicon Valley Bank or First Republic Bank,” he said.
While he’s happy that JPMorgan stepped in to buy First Republic, he’s not so happy that one of the world’s biggest banks ended up being the buyer. “I think we lost something big here, and my only hope is that JPMorgan respects the brand and customer service that [FRB] It has taken decades to build.”
“I was hoping it would be PNC,” Bahn said, referring to the Pittsburgh-based bank that was said to be among the bidders for FRB. “I thought it would be nice to see another slightly smaller bank win to consolidate and maybe strengthen this position to compete with the bigger banks.”
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