By Eric Dresselhuys, CEO
On March 9th, 2023 the energy innovation community was surprised to learn of a rapidly deteriorating situation at Silicon Valley Bank (SVB). By the next morning, news of the bank’s seizure and suspension of banking activities shifted surprise to panic among many of SVB’s clients: How would companies make payroll? What would happen to critical capital commitments to support projects? How can we pay our bills?
Many companies worked long hours over the weekend, offers of short-term cash infusions were made, public disclosures were filed by those affected, statements of support were issued, and employees were left to wonder what it would all mean. With the Federal Government’s commitments late Sunday, everyone breathed a sigh of relief. But clearly, things had changed.
ESS has had a long relationship with SVB, including a few accounts active at the time of the bank’s collapse. Fortunately, following our IPO in 2021, we diversified our banking relationships and on March 9th, over 99% of ESS’ funds (about $140M at the end of the year) were held in other, major financial institutions. We would have made normal payroll and paid our bills with minimal inconvenience. But, while our risk was quite limited, (we had about $600,000 in deposits, $250,000 of which was fully guaranteed), a small loan and modest letter of credit used for shipping internationally, we were nevertheless closely watching how matters unfolded. We understood that anything short of the ultimate resolution – full guarantee of depositors’ assets – could have sent ripples throughout the energy transition ecosystem.
SVB was an important partner in the early days of ESS, just as they are for many tech start-ups including many focused on decarbonizing our energy system. The idea that SVB ‘understood’ start-ups better than most banks has been widely reported and from first-hand experience we can tell you it’s true. Having a bank with a range of products and services targeted at startups is critical to a young company’s success and helps to drive the innovation economy broadly.
We’re grateful that the Federal Government stepped in to protect the resources of numerous early-stage companies working to solve the world’s big problems. We’re happy for everyone at SVB that the bank is back open and operational. Although the final chapter in this story has yet to be written, we’re hopeful that the bank finds solid footing to continue its important work in supporting innovation and also that additional financial institutions step up to address the needs of this engine of our economy. If this last week taught us anything, it’s that we need more institutions that offer what SVB provided its innovative clients, not less.