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These Biotech Companies Were Told Their SVB Funds Were Available. It Wasn’t That Simple.

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But early this week, some companies were still left hurrying to make sure they could make this week’s payroll. In biotech—a sector where many startups relied on SVB—some were still finalizing the opening of new checking accounts to pay their employees from; and many of those who tried to move their funds out of their SVB accounts were unable to do so because the bank’s website kept crashing.

Many biotechs used their SVB accounts to pay their bills and to draw their payroll funds. Making payroll was foremost among many executives’ minds—payments to vendors could be delayed, but state and federal laws require companies to make timely wage payments to employees. 

SVB didn’t respond to a request for comment. 

About 12% of SVB’s client deposits of $173 billion came from the life sciences and healthcare sector, SVB said in its fourth-quarter earnings report. Biotech companies gravitated to SVB in part because of its strong relationships with venture capitalists and because it was known for providing good service even to smaller companies. 

Protagonist Therapeutics Inc.,

a biotech in Newark, Calif., tried last Thursday afternoon to move roughly $10 million of its $13 million deposited at SVB, but the transfer wouldn’t go through, said Protagonist Chief Financial Officer

Asif Ali.

The next day, the bank was shut down. 

The biotech, which has more than 100 employees and runs clinical trials for drugs to treat blood and immune-system disorders, has more than $200 million invested outside of SVB. But it had to find a way to open a new checking account and link it to its payroll service provider. As of Monday, Protagonist said there were still logjams in opening up new checking accounts at banks inundated with requests from former SVB customers.

“The service providers are just overwhelmed right now,” said Mr. Ali. “The speed of this thing, obviously, was a shock.” 

On Tuesday, a Protagonist spokeswoman said that the company now has access to its SVB funds, and that all employees will be paid on time.

Biotech is an expensive endeavor in which companies can quickly burn through tens of millions of dollars in conducting early development research and running clinical trials. SVB’s troubles came as the industry was already experiencing a financing crunch as investors have shifted money away from riskier sectors. 

SHARE YOUR THOUGHTS

How can biotech companies navigate the SVB collapse? Join the conversation below.

ALX Oncology Holdings Inc.,

a South San Francisco, Calif.-based developer of cancer drugs, was required to keep funds in its SVB account under the terms of a loan agreement with the bank, said Chief Financial Officer

Peter García.

On Monday morning, ALX employees logged into its SVB account to arrange a wire transfer to its payroll provider, but the site kept producing error messages, he said. They were eventually able to log in to make the transfer after a couple of hours.

“Their servers were just overloaded,” said Mr. García. “Probably as people were trying to transfer money all at the same time.” 

Camille Samuels,

a partner at venture-capital firm Venrock, said that five of her portfolio companies were banking with SVB. On Thursday, nearly all of her companies opened up new checking accounts in banks outside of SVB, and some moved a small amount of money into the new accounts. Ms. Samuels said she wanted to balance prudence with loyalty to SVB, and not contribute to a run on the bank. 

“We wanted to stick with SVB,” Ms. Samuels said. 

Once the bank was closed, Ms. Samuels and her partners at Venrock began discussing how they would help their companies make payroll if their funds weren’t available on Monday. Over the weekend, the partners decided to make short-term loans available to their portfolio companies, using the personal funds of the partners, Ms. Samuels said. 

The abrupt collapse of the Silicon Valley Bank, the second-biggest bank failure in U.S. history, prompted regulators to impose emergency measures to stem the fallout. WSJ’s Rachel Ensign explains how the crisis unfolded and what could happen next. Photo: Preston Gannaway for The Wall Street Journal

Ms. Samuels sent out term sheets for the loan offers to two of her companies on Sunday night in case they weren’t able to access their SVB funds on Monday. Some companies had trouble logging into the SVB site, so Ms. Samuels had to put in a call to a contact at SVB to get the transactions done to make payroll, she said. 

Ultimately, none of Ms. Samuels’ portfolio companies needed to take loans, but seven other companies funded by Venrock did because their payroll deductions were due early on Monday, and they weren’t sure that they would be able to access their SVB funds in time, she said.

Now, Ms. Samuels said she is working with her companies to make them more resilient in the event of future bank closures, such as making sure they have opened at least two additional bank accounts. For years, companies didn’t focus on maximizing returns on their cash because interest rates were so low, and many felt safe with SVB, which had long been a reliable and trusted bank, she said. 

“SVB was like the sun and the moon for people in venture capital,” said Ms. Samuels. “It had been there all along.”

Write to Joseph Walker at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



But early this week, some companies were still left hurrying to make sure they could make this week’s payroll. In biotech—a sector where many startups relied on SVB—some were still finalizing the opening of new checking accounts to pay their employees from; and many of those who tried to move their funds out of their SVB accounts were unable to do so because the bank’s website kept crashing.

Many biotechs used their SVB accounts to pay their bills and to draw their payroll funds. Making payroll was foremost among many executives’ minds—payments to vendors could be delayed, but state and federal laws require companies to make timely wage payments to employees. 

SVB didn’t respond to a request for comment. 

About 12% of SVB’s client deposits of $173 billion came from the life sciences and healthcare sector, SVB said in its fourth-quarter earnings report. Biotech companies gravitated to SVB in part because of its strong relationships with venture capitalists and because it was known for providing good service even to smaller companies. 

Protagonist Therapeutics Inc.,

a biotech in Newark, Calif., tried last Thursday afternoon to move roughly $10 million of its $13 million deposited at SVB, but the transfer wouldn’t go through, said Protagonist Chief Financial Officer

Asif Ali.

The next day, the bank was shut down. 

The biotech, which has more than 100 employees and runs clinical trials for drugs to treat blood and immune-system disorders, has more than $200 million invested outside of SVB. But it had to find a way to open a new checking account and link it to its payroll service provider. As of Monday, Protagonist said there were still logjams in opening up new checking accounts at banks inundated with requests from former SVB customers.

“The service providers are just overwhelmed right now,” said Mr. Ali. “The speed of this thing, obviously, was a shock.” 

On Tuesday, a Protagonist spokeswoman said that the company now has access to its SVB funds, and that all employees will be paid on time.

Biotech is an expensive endeavor in which companies can quickly burn through tens of millions of dollars in conducting early development research and running clinical trials. SVB’s troubles came as the industry was already experiencing a financing crunch as investors have shifted money away from riskier sectors. 

SHARE YOUR THOUGHTS

How can biotech companies navigate the SVB collapse? Join the conversation below.

ALX Oncology Holdings Inc.,

a South San Francisco, Calif.-based developer of cancer drugs, was required to keep funds in its SVB account under the terms of a loan agreement with the bank, said Chief Financial Officer

Peter García.

On Monday morning, ALX employees logged into its SVB account to arrange a wire transfer to its payroll provider, but the site kept producing error messages, he said. They were eventually able to log in to make the transfer after a couple of hours.

“Their servers were just overloaded,” said Mr. García. “Probably as people were trying to transfer money all at the same time.” 

Camille Samuels,

a partner at venture-capital firm Venrock, said that five of her portfolio companies were banking with SVB. On Thursday, nearly all of her companies opened up new checking accounts in banks outside of SVB, and some moved a small amount of money into the new accounts. Ms. Samuels said she wanted to balance prudence with loyalty to SVB, and not contribute to a run on the bank. 

“We wanted to stick with SVB,” Ms. Samuels said. 

Once the bank was closed, Ms. Samuels and her partners at Venrock began discussing how they would help their companies make payroll if their funds weren’t available on Monday. Over the weekend, the partners decided to make short-term loans available to their portfolio companies, using the personal funds of the partners, Ms. Samuels said. 

The abrupt collapse of the Silicon Valley Bank, the second-biggest bank failure in U.S. history, prompted regulators to impose emergency measures to stem the fallout. WSJ’s Rachel Ensign explains how the crisis unfolded and what could happen next. Photo: Preston Gannaway for The Wall Street Journal

Ms. Samuels sent out term sheets for the loan offers to two of her companies on Sunday night in case they weren’t able to access their SVB funds on Monday. Some companies had trouble logging into the SVB site, so Ms. Samuels had to put in a call to a contact at SVB to get the transactions done to make payroll, she said. 

Ultimately, none of Ms. Samuels’ portfolio companies needed to take loans, but seven other companies funded by Venrock did because their payroll deductions were due early on Monday, and they weren’t sure that they would be able to access their SVB funds in time, she said.

Now, Ms. Samuels said she is working with her companies to make them more resilient in the event of future bank closures, such as making sure they have opened at least two additional bank accounts. For years, companies didn’t focus on maximizing returns on their cash because interest rates were so low, and many felt safe with SVB, which had long been a reliable and trusted bank, she said. 

“SVB was like the sun and the moon for people in venture capital,” said Ms. Samuels. “It had been there all along.”

Write to Joseph Walker at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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