Before its collapse last week, Silicon Valley Bank was a champion of the growing climate tech sector.
“As the bank of the innovation economy, and in alignment with our mission to help our clients succeed and innovate for a better world, SVB has committed to provide at least $5 billion in loans, investments and other financing to support sustainability efforts by 2027,” the company pledged last year.
After a cleantech bubble more than a decade ago, businesses in the reborn climate tech field had been taking off in recent years. The California-based bank offered them assistance in project finance, regulatory hurdles and sector networking challenges. Its website boasted “1,550 prominent clients in the climate technology and sustainability sector.”
“It was an industry getting a second wind, and it was great seeing that kind of support,” said Naman Trivedi, CEO of Seattle’s WattBuy, regarding financial backing for climate tech in general.
Then came the bank run and SVB’s rapid downfall, followed by a tense few days for startups in climate and other sectors, unsure whether they would make payroll or bounce checks to vendors.
It’s unclear how many climate tech companies from the Pacific Northwest were impacted. Mel Clark, president and CEO of the CleanTech Alliance, said it doesn’t appear that a high percentage of the region’s climate tech companies banked with SVB, but that the industry group was “continuing to monitor impacts to the sector.” SVB’s website listed ESS, an Oregon company in long-duration energy storage, as a client. The company was not able to comment on the collapse.
But experts, analysts and investors from around the country have weighed in with concerns about the potential impact on the field.
- The bank was willing to support climate tech companies with “longer gestation periods” and those operating in areas with extensive government regulations, reported Fast Company, making its loss particularly problematic for the sector.
- The collapse of SVB is being called “the first major headwind” to hit climate tech following the massive financial boost that came with last year’s passage of the Inflation Reduction Act, which pumps billions of dollars into the sector.
- Analysts predict that losing SVB will mean higher costs for capital, which could hamper progress for some climate tech companies.
- SVB backed the majority of the community solar projects in the U.S., which has been important vehicle for spreading the reach of renewable power. Some experts say financial services in this area has diversified in recent years, making the loss of SVB less problematic, while others expect it could create problems.
E8, a Seattle-based investment network focused on climate tech, estimated that less than half of its portfolio companies banked at SVB. But for those who did, the group quickly started discussing with its community what options were available for providing them short-term capital if they lost access to their cash.
“Because the investors around climate tech are very mission driven, it was really refreshing to see a lot of collaborating with entrepreneurs,” said Dana Sather Robinson, an E8 board member.
The government committed to protecting both insured and uninsured SVB deposits. But the incident provided a cautionary tale nonetheless.
“This is an important lesson for founders to have good investor relationships,” said Sather Robinson. “That partnership between early-stage founders and investors can make a huge difference when times get rocky.”
Trivedi said that WattBuy, a clean energy software company, didn’t bank with SVB, but he understood why fellow startups in the sector were looking for non-traditional banking options like SVB.
“It’s a more digital-first experience,” Trivedi said. The newer institutions didn’t have added fees for transactions and made it easier to manage accounts and conduct banking online than was possible traditional banks. His company uses Mercury, a fintech company that partners with banks.
Banks should be reliable “like a public utility,” Trivedi said. “I don’t think many of us running companies think of [bank failures] as one of the problems you’re going to have to solve on a week-to-week basis,” he said.
Many in the climate tech sector hope and predict that the SVB debacle won’t have lasting impacts on their progress.
“We’re just grateful now that the founders are past the worst, hopefully,” Sather Robinson said.