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The collapse of Silicon Valley Bank was an existential crisis for founders like me — one that came out of nowhere and had nothing to do with the strength of our businesses. Overnight, something as basic as access to our own capital was thrown into question.
It exposed a hard truth: much of the startup ecosystem was built on assumptions that had never been truly tested under pressure. Founders were suddenly forced to confront questions most had never seriously considered — how secure their banking relationships really were, how resilient their capital structure was and what would happen if critical institutions stopped behaving predictably.
For me, this wasn’t theoretical. It put a $100 million deal at risk and forced an immediate reset in how I think about fundraising, risk and control. Strategies that made perfect sense in stable markets unraveled quickly. In their place, I had to adopt a different lens — one that prioritizes optionality, redundancy and resilience alongside and maybe even over efficiency and optimization.
A stress test we didn’t choose
When Silicon Valley Bank collapsed, the first concerns were immediate. Could we access our cash? Could we make payroll? Could the business continue operating without disruption?
At the time, I was running my first startup, a fintech company helping young families build savings for their children. Operating in a regulated financial system meant our business depended on banks for far more than deposits. We relied on them for payments, custody, credit facilities and core operations. SVB was deeply embedded in that infrastructure.
The timing of SVB’s collapse made the impact sharper. My company was in the middle of an active M&A process, with multiple potential acquirers and ongoing management discussions.
That momentum stalled almost immediately on our $100 million-plus deal. Our investment banker advised us to expect broad delays across fintech transactions, potentially stretching timelines by a year or more. Valuation expectations reset, and the likelihood of closing changed overnight, not because our business had changed, but because the environment had.
What began as an operational crisis quickly forced founders like me to confront structural realities they hadn’t needed to navigate before.
How common fundraising assumptions increase risk
Before SVB’s collapse, I operated under a set of assumptions that many founders shared. Seeing them fail in real time forced a reset.
- Institutional stability was assumed, not engineered. SVB was treated as infrastructure rather than a fallible resource. Its reputation and integration into the startup ecosystem created a sense of safety that was not backed by structural resilience.
- Venture debt was viewed as low-risk leverage. In strong markets, venture debt feels efficient. It extends the runway without the immediate dilution that comes with venture capital equity plays. What became clear is how that debt actually sits in the waterfall.
Because venture debt sits above equity in the exit waterfall, it can block future financing in down markets: new investors are reluctant to put fresh capital into a company where debt holders have first claim on assets and cash flows. In our case, debt reduced flexibility and made recovery financing far harder when we needed it most.
- Institutional support was assumed to hold under stress. There was an implicit belief that long-standing relationships would provide continuity in a crisis. What SVB revealed is that institutions prioritize their own survival first. Support exists, but it is conditional and unpredictable.
- Fundraising was optimized for growth, not resilience. Many decisions were made with stable markets in mind. When conditions shifted, those same decisions limited options instead of preserving them.
This all reframed how I think about capital. Fundraising stopped being about maximizing valuation or extending runway at all costs. It became about managing downside risk, preserving control, and understanding how the waterfall actually works when things go wrong.
How to fundraise in a world where “normal” no longer exists
The SVB collapse made one thing clear. Founders cannot build companies assuming stability or institutional protection. Fundraising today requires different priorities. Here’s how you can protect your startup and minimize financial risks while still maximizing control:
Diversify banking relationships early and actively
Concentrating all cash at a single institution creates unnecessary exposure. Founders should maintain active relationships with multiple banks, even if it feels inefficient. Accounts should be open, funded, and tested. In a crisis, the ability to move money quickly can determine whether a company survives the next payroll cycle.
Be extremely conservative with venture debt
Debt changes the waterfall in ways many founders underestimate. Because venture debt sits above equity, it can block recovery capital and make new investors hesitant in a downturn. Founders should evaluate debt based on how it affects future financing under stress, not just how it extends runway in good times. If debt reduces optionality, it increases risk.
Pressure-test institutional assumptions
Founders should ask investors, lenders, and partners direct questions before committing. What happens in a market shock? How will key decisions be made if conditions change? What flexibility actually exists? Clear answers reduce risk.
Preserve optionality at every layer of the company
Optionality extends beyond capital. It includes banking relationships, covenants, partnerships, and exit paths. Structures that lock a company into a single outcome tend to fail first when conditions shift.
Assume support is conditional
Institutional support is never guaranteed. Founders should plan as if they will need to navigate disruptions without external rescue. Conservative leverage, diversification and structural flexibility create room to maneuver when markets turn.
Building for uncertainty
The lasting lesson from SVB’s collapse is about how founders structure companies for uncertainty.
Market shocks can stall fundraising, freeze exits, and expose hidden constraints at the same time. Founders who understand their waterfall, limit structural risk, and preserve optionality give themselves the ability to adapt when conditions change. In a world where “normal” can disappear overnight, flexibility and preparation are what keep companies alive.
The collapse of Silicon Valley Bank was an existential crisis for founders like me — one that came out of nowhere and had nothing to do with the strength of our businesses. Overnight, something as basic as access to our own capital was thrown into question.
It exposed a hard truth: much of the startup ecosystem was built on assumptions that had never been truly tested under pressure. Founders were suddenly forced to confront questions most had never seriously considered — how secure their banking relationships really were, how resilient their capital structure was and what would happen if critical institutions stopped behaving predictably.
For me, this wasn’t theoretical. It put a $100 million deal at risk and forced an immediate reset in how I think about fundraising, risk and control. Strategies that made perfect sense in stable markets unraveled quickly. In their place, I had to adopt a different lens — one that prioritizes optionality, redundancy and resilience alongside and maybe even over efficiency and optimization.
