SVB shake up

Following Silicon Valley Bank collapse, banking diversification is key for Houston founders

Last weekend was a tumultuous one for founders and funders in Houston and beyond. Here's what lessons were learned. Photo via Getty Images

Last week, Houston founder Emily Cisek was in between meetings with customers and potential investors in Austin while she was in town for SXSW. She was aware of the uncertainty with Silicon Valley Bank, but the significance of what was happening didn't hit her until she got into an Uber on Friday only to find that her payment was declined.

“Being positive in nature as I am, and with the close relationship that I have with SVB and how they’ve truly been a partner, I just thought, ‘OK, they’re going to figure it out. I trust in them,'” Cisek says.

Like many startup founders, Cisek, the CEO of The Postage, a Houston-based tech platform that enables digital legacy planning tools, is a Silicon Valley Bank customer. Within a few hours, she rallied her board and team to figure out what they needed to do, including making plans for payroll. She juggled all this while attending her meetings and SXSW events — which, coincidentally, were mostly related to the banking and fintech industries.

Sandy Guitar had a similar weekend of uncertainty. As managing director of HX Venture Fund, a fund of funds that deploys capital to venture capital firms around the country and connects them to the Houston innovation ecosystem, her first concern was to evaluate the effect on HXVF's network. In this case, that meant the fund's limited partners, its portfolio of venture firms, and, by extension, the firms' portfolios of startup companies.

“We ultimately had no financial impact on venture fund 1 or 2 or on any of our portfolio funds or our underlying companies,” Guitar tells InnovationMap. “But that is thanks to the Sunday night decision to ensure all deposits.”

On Sunday afternoon, the Federal Deposit Insurance Corp. took control of SVB and announced that all accounts would be fully insured, not just up to the $250,000 cap. Customers like Cisek had access to their accounts on Monday.

“In the shorter term, the great news is SVB entity seems to be largely up and functioning in a business as usual manner,” Guitar says. “And they have a new leadership team, but their existing systems and predominantly the existing employee base is working well. And what we're hearing is that business as usual is taking place.”

Time to diversify

In light of the ordeal, Guitar says Houston founders and funders can take away a key lesson learned: The importance of bank diversification.

“We didn't think we needed one last week, but this week we know we need a resilience plan," she says, explaining that bank diversification is going to be added to "the operational due diligence playbook."

"We need to encourage our portfolio funds to maintain at least two banking relationships and make sure they're diversifying their cash exposure," she says.

A valued entity

Guitar says SVB is an integral part of the innovation ecosystem, and she believes it will continue on to be, but factoring in the importance of resilience and diversification.

"Silicon Valley Bank and the function that they have historically provided is is vital to the venture ecosystem," she says. "We do have confidence that either SVB, as it is currently structured or in a new structure to come, will continue to provide this kind of function for founders."

Cisek, who hasn't moved any of her company's money out of SVB, has similar sentiments about the importance of the bank for startups. She says she's grateful to the local Houston and Austin teams for opening doors, making connections, and taking chances for her that other banks don't do.

"I credit them to really being partners with startups — down to the relationships they connect you with," she says. "Some of my best friends who are founders came from introductions from SVB. I've seen them take risks that other banks won't do."

With plans to raise funding this yea, Cisek says she's already started her research on how to diversify her banking situation and is looking into programs that will help her do that.

Staying aware

Guitar's last piece of advice is to remain confident in the system, while staying tuned into what's happening across the spectrum.

“This situation that is central to the venture ecosystem is an evolving one," she says. "We all need to keep calm and confident in business as usual in the short term while keeping an eye to the medium term so that we know what happens next with this important bank and with other associated banks in the in our industry."

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Building Houston

 
 

Cemvita has some news regarding its C-level execs. Photo courtesy of Cemvita

An innovative Houston startup that's working with energy companies to decarbonize their operations has made changes to its C-suite.

Tara Karimi, who co-founded Cemvita with her brother Moji, has transition to the company's chief science officer. Liz Dennett has been hired to Karimi's previous role of CTO. The changes enable Karimi to focus on leading Cemvita's scientific research and development efforts as well as participating in driving innovation within the biotech industry as a whole, according to the company's press release.

"I'm excited to take on the role of chief science officer at Cemvita and what it represents for our company's growth," says Karimi in the release. "As chief science officer, I look forward to shaping policy and driving the conversation around the role of biotechnology in the energy transition."

As CTO, Dennett will lead the development of Cemvita's unique biotech products that tap into microbes to decarbonize operations on energy plants. Most recently, Dennett was vice president of data architecture and data engineering at Wood Mackenzie. She previously worked in tech and sustainability-focused roles at Hess Corp., Biota Technology, and Amazon Web Services.

“Working with biological systems presents a unique challenge but also a unique opportunity," says Dennett in the release. "It’s uniquely difficult to go from benchtop to in-situ reactors or oil wells with microbes and to achieve the kind of incredible results that we’re seeing in the lab. You need to build teams with deep specializations in chemistry, biology, energy systems, and geology.”

Dennett, who has her PhD and Master's from the University of Wisconsin-Madison and has served on Cemvita's advisory board for about a year, will report to CEO Moji Karimi directly.

“I know that Tara and Liz are going to make history at Cemvita,” says Moji Karimi in the release. “With 15 years of experience using data-driven approaches to solve pressing energy challenges, Liz brings to bear the kind of creativity and expertise that can quickly and meaningfully advance Cemvita’s impact on the Energy Transition.”

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