'A mad rush:' How the Silicon Valley Bank collapse impacts health tech startups in OSF's portfolio
The collapse of Silicon Valley Bank last week impacted startups in the portfolio of OSF HealthCare's corporate investment arm.
Mayank Taneja is the vice president of venture investments for OSF Ventures. He says he spent much of last weekend on the phone with those companies.
"It was like a mad rush of sorts," he said.
Immediately after the bank's closure last week, Taneja said making payroll was the primary concern for companies with the majority of their cash tied up with SVB.
"For those companies who had their primary bank as SVB, I think it was a problematic situation that occurred on Friday, when the Fed took over and the FDIC took the bank into receivership," he said.
Longer term, he said many tech companies are moving their accounts to major banks like JPMorgan or Wells Fargo, where they have a greater sense of security. But for companies with loans open at SVB, the situation is trickier. They are required to keep money at the bank.
"The ones that have debt provisions or venture debt with SVB, or a line of credit with SBB are the ones that are consulting with attorneys, you know, what would be the repercussions if we move the money? It could be counted as a default. And so how do we sort of navigate through that?" he said.
Taneja said he also advises startups to opens at least two or three accounts at different institutions as a general best practice.
OSF HealthCare itself had no money invested in SVB, Taneja said.
Looking forward, Taneja said the bank's collapse will likely have a chilling effect on startup investors for a time.
"With such a thing happening, you tend to be more risk-averse going forward. So, I think things will take some time to normalize going ahead, you know, coming back to where we were pre-collapse," he said.
He noted banks will also raise the bar on criteria for lending, drying up a pool of riskier venture capital debt that was previously available. He said this will leave equity financing as the primary mode of accruing capital for startups.
"Going ahead, this sort of brings up that fear of recession, fear of uncertainty," Taneja said. "And definitely, I think healthcare innovation in general takes a step or two back, and we will take some more time going ahead."