Bank failure touched only handful of state startups
Milwaukee-based gener8tor among Silicon Valley clients
Late last week, as Silicon Valley Bank was melting down, Milwaukee-based startup accelerator gener8tor wasn’t sure it could make payroll.
Gener8tor, which provides venture capital to startup businesses, is one of the higher-profile Wisconsin firms that did business with Silicon Valley Bank, which collapsed last week after a run on the bank.
“We’re in the business of risk, by investing in venture capital,” said gener8tor cofounder Troy Vosseller. “But never in my wildest dreams did I think the biggest risk was where we put our cash for deposits.”
Many assume the Silicon Valley Bank collapse only affected billionaires and venture-capital funds taking big risks with their money, Vosseller said. But it touched small businesses across the country, including gener8tor, which has 120 full-time workers.
A search of PitchBook, an investment capital database, turned up 11 Wisconsin companies that had done business with Silicon Valley Bank. Several of those companies were gener8tor clients.
Some of the companies were described on Pitchbook as doing “general business banking” with Silicon Valley Bank, while others had taken out loans from the bank, including some that got Paycheck Protection Program loans during the pandemic.
The Santa Clara-based Silicon Valley Bank courted startups and venture-capital firms and had grown to be the 16th largest bank in the country. But as interest rates rose, tech companies started scrambling for capital and pulling their money from the bank. That forced the bank to liquidate assets, which it sold at a loss. By Friday, the bank had collapsed.
Silicon Valley Bank didn’t have a physical presence in Wisconsin. However, it was attractive to some of the state’s tech companies because it had an expertise in startup financing that Wisconsin banks often lack, said Scott Resnick, a Madison-based tech business executive.
“You want to make sure your banker understands the business practice that you are trying to do,” said Resnick, chief operating officer of Hardin Design & Development. Still, Wisconsin’s startup ecosystem was largely unaffected by the failure of Silicon Valley Bank, he said.
But last week’s bank meltdowns underscore why Wisconsin needs more local sources of capital, said Missy Hughes, secretary and CEO of the Wisconsin Economic Development Corp. WEDC recently launched a $50 million venture capital fund for Wisconsin businesses. Gov. Tony Evers proposed another $75 million for the fund in his budget.
“We’ve got entrepreneurs who are accessing capital far away, whether it’s in Silicon Valley or in New York,” Hughes said. “This will give them the opportunity to access that capital right here in Wisconsin — and to be able to, I think, have a little less risk associated with that.”