By Jeffrey Dastin, Anna Tong and Krystal Hu
PALO ALTO, Calif. (Reuters) – Technology executives, prominent venture capitalists and founders including OpenAI CEO Sam Altman raced this weekend to keep companies implicated in the Silicon Valley bank collapse afloat.
The dramatic collapse of the bank, which focuses on tech startups, on Friday was the biggest since the 2008 financial crisis. It has roiled global markets, crushed bank stocks and left California tech entrepreneurs grappling with how to run their payrolls .
Aiming to avoid what Garry Tan, the CEO of startup accelerator Y Combinator, called a potential “extinction level event” in the tech sector, industry executives have acted quickly to do everything in their power to reduce small save companies.
Altman, who runs one of Silicon Valley’s hottest companies, has been bailing out some entrepreneurs out of his own pocket, according to a Twitter post from his brother and a beneficiary who spoke to Reuters.
“I ran out of options, so I just emailed him,” Rad AI CEO Doctor Gurson said in an interview on Saturday. Within an hour or two, Altman responded and offered him a six-figure sum: enough to do the payroll and no strings attached, just a request to pay the money back as soon as Gurson is able, he said.
Asked for comment, Altman told Reuters, “I remember the investors who helped me when I was running a startup and I really needed it and I always try to pay it off.”
Henrique Dubugras, co-CEO of fintech startup Brex, also spent the weekend working on the phone after his company announced an emergency line of credit on Friday to help startups deal with their next paycheck.
As of Saturday night, he said Brex had received $1.5 billion in demand from nearly 1,000 companies. “We’re trying to recruit lenders by the end of tomorrow. Everyone’s sprinting,” he said.
Even small startups are taking part in the campaign to help others. Aleem Mawani, founder of Streak, a company with about 30 employees, tweeted Friday that he would lend his personal money, with no strings attached, to other small startups worried about paying employees. He said he then held talks with some companies and aims to prioritize lending to those living paycheck to paycheck.
“I’m a founder and I know how awful it would be not to do payroll,” Mawani said in an interview.
“MISCONDUCT OR MISMANAGEMENT”
As of late Saturday, more than 3,500 CEOs and founders, representing some 220,000 workers, had signed a petition launched by Y Combinator, appealing directly to US Treasury Secretary Janet Yellen and other depositors, many of them small businesses, who Run the risk of not paying their employees to assist over the next 30 days.
The petition advocated “greater regulatory oversight and capital requirements for regional banks” and an investigation into “misconduct or mismanagement” by SVB executives. More than 100,000 jobs could be at risk, the petition warned.
SVB did not respond to a request for comment, and Y Combinator did not elaborate on the petition.
Venture investors have advised startups to look for alternatives to obtain short-term liquidity. Some, including Lowercarbon Capital, have offered loans to portfolio companies whose funds are held by the SVB.
His partner Clay Dumas said Lowercarbon will support payroll for the next two weeks and will transfer funds on Monday.
Khosla Ventures told Reuters, “Given the rapidly evolving situation, we are speaking to over 100 portfolio companies who are assessing their critical needs and planning to bridge where we are a lead or large investor.”
‘LIFELINE’
Rad AI’s Gurson hadn’t spoken to Altman in years when he emailed the OpenAI boss Saturday morning, desperate for help. The start-up banked on SVB, whose sudden closure meant it lacked the money to pay around 65 employees on Monday, he said.
“People’s livelihoods depend on us,” said Gurson, whose San Francisco-based company helps radiologists work more efficiently and includes employees with wide-ranging responsibilities and resources. “They have mortgages to pay, they have bills.”
Gurson’s co-founder waited eight hours for the Federal Deposit Insurance Corporation’s helpline, he said. Several attempts to transfer funds from the SVB had failed.
But Gurson saw a Twitter post from Altman, whom he met as a founder while attending Y Combinator in 2014, where Altman was president. The two men didn’t know each other very well, he said.
“It’s like a lifeline,” Gurson said of Altman’s generosity.
Gurson “conservatively” estimated that Altman has committed more than $1 million to support other startups in similar need.
“The crazy thing here is that he’s not an investor in our company,” Gurson said. “He didn’t ask for anything.”
Altman didn’t comment on how much he’d given to companies, but said he didn’t see his contributions as risky.
“Even if SVB doesn’t find a buyer or loan over the weekend, much of the money that startups have deposited will be made available to them. But in the meantime, people are facing a real cash crunch through no fault of their own and employees need to be paid,” he said.
(Reporting by Jeffrey Dastin in Palo Alto, Anna Tong and Krystal Hu in San Francisco; Additional reporting by Tatiana Bautzer; Writing by Kenneth Li; Editing by William Mallard)
