Etsy sellers and those with shops on Shopify have had to make important decisions about their ongoing operations in the wake of the Silicon Valley Bank collapse. (See, “Run on Silicon Valley Bank Impacts Operations at Tech Firms.”)
(See update below for breaking news from FDIC.)
Merchants who use ecommerce platform Shopify turned to its discussion boards to ask about the impact, given media reports that Shopify was an SVB client. Sellers on one Shopify thread wondered if their disbursements were delayed because of the SVB collapse.
“Should we temporarily shut down Shopify Payments,” one seller asked.
Another seller said they believed those with Shopify capital loans would not be able to turn Shop Pay off.
Shopify did not respond to such threads, nor did it post an announcement, as far as we could see by Sunday evening. But oddly, Shopify CEO made a comment on his own Twitter account saying there would be a “minor impact” for the company.
Tobi Lutke said a small portion of its US operational fund flows were tied up in SVB, “but we are working around it and it should be business as usual” – with nothing directly addressing the impact on sellers.
Finally, at 6 pm on Sunday evening, Lutke tweeted a copy of an email Shopify sent merchants, including offering assistance to those with SVB accounts who might have trouble meeting payroll. It made no mention of delayed disbursements, hopefully a sign that there were none related to SVB.
Meanwhile, Etsy delayed disbursements to an undisclosed number of sellers and sent an email to those affected on Friday. Numerous sellers posted they were putting their Etsy shops on vacation until they learned more. It took the company until late on Saturday to issue a more public announcement with slightly more details.
Some ecommerce companies were more proactive. Poshmark published a blog post from Chief Operating Officer John McDonald on Saturday that stated in part, “I want to assure everyone in our seller community that all accounts on Poshmark continue to be safe and secure. We do not use SVB to store customer or marketplace funds, and your ability to process payments and redemptions is not affected.”
Payoneer published a blog post from CEO John Caplan who said in part, “I want to communicate that funds held by you in your Payoneer account are available and accessible to you in the normal way. Customer funds held with Payoneer are not at risk from the closure of Silicon Valley Bank.”
Some said Silicon Valley Bank’s own poor communications contributed to its downfall. Bradford Williams, who held high-level PR positions at many tech and Silicon Valley companies including eBay, Yahoo, Gateway, Alibaba, saw poor communications as a contributing factor to SVB’s demise. “A stark reminder of the power of (poor) communication,” he posted on LinkedIn. “I’ve seen it many times: CEO waves off strategic counsel and insists “I’ve got this.” #communication #bankrun”
Some are blaming the Fed for raising interest rates – but should a bank that doesn’t know interest rates may rise – and plan for such eventualities – be in banking? (SVB knew rates were rising, according to reports on its website warning clients of the challenging macro environment.)
It’s striking that SVB’s situation is far different from the troubles that arose during the 2008 Global Financial Crisis (GFC), which many associate with junk mortgages. Even though SVB served a clientele that is risky by nature, its collapse wasn’t due to “junk” clients, though many were facing challenges in the post-pandemic environment.
In its March 8 mid-quarter report outlining “Strategic actions to strengthen our financial position and enhance profitability and financial flexibility now and in the future,” SVB disclosed losses (not client related), but outlined a plan and, on Slide 10, said its financial position “enables us to take these strategic actions,” including, ample liquidity; strong capital; and a strong credit track record and asset quality.
That may make it easier for the FDIC to sell off the bank in whole, in parts, or to sell off its assets, in order to return funds to depositors who exceed the $250,000 FDIC-insured cap.
It’s impossible to know until the FDIC shares more on Monday whether the situation is dire – some are already advocating for or against a taxpayer bailout.
Advocates for a bailout cite “contagion” – fear of the repercussions that may follow the collapse. Infinitely preferable to such a drastic action would be for venture capitalists to step in and help their clients make it through the following days, weeks, and months ahead to help stave off contagion. After all, they believed in them enough to help them raise funds.
Let us know what your challenges you’re seeing as a online seller in the wake of the SVB collapse.
Update 3/12/2023: The FDIC will complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. See details on the FDIC.gov website.