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- SVB's was a leading provider of venture capital to climate startups.
- The bank's crash left a financing gap in the climate-tech sector, founders told The New York Times.
- New lenders scrambled to set up relief funds for SVB's clients.
The fall of Silicon Valley Bank leaves a major financing gap for companies developing climate solutions like solar farms and carbon-removal technology. That could make it harder for startups to get funding and scale their operations.
SVB's website says the bank worked with more than 1,550 clients in the climate-tech and sustainability sector, particularly community solar. The bank also says it led or participated in 62% of community-solar financing deals, worth about $3.2 billion in total. And according to ImpactAlpha, SVB was a leading provider of venture debt to climate startups.
"Silicon Valley Bank was in many ways a climate bank," Kiran Bhatraju, the founder and CEO of Arcadia, the largest community-solar manager in the country, told the New York Times. "When you have the majority of the market banking through one institution, there's going to be a lot of collateral damage."
Federal regulators closed SVB on Friday following a run on deposits. The move has stoked fears that climate startups will face a tougher road than many of them already do.
Arcadia withdrew most of its money from SVB last week, Bhatraju told the Times, but he raised concerns about other solar developers who relied on the bank for loans and lines of credit to build their projects and now need to find other sources of funding.
Ethan Cohen-Cole, the cofounder and CEO of Capture6, a startup developing facilities for carbon removal and storage, is an SVB client. Cohen-Cole told the Times that he expects to be able to pay his 20 employees because of the $250,000 insurance payout from the Federal Deposit Insurance Corporation. The company had about $4 million in accounts managed by SVB.
The fallout has led to a network of climate startups, venture-capital firms, and other lenders to mobilize their resources and help blunt the impact, Impact Alpha reported. A handful of fundraising initiatives emerged in recent days to help founders who need short-term cash. These include efforts by the Open Road Alliance, which provides bridge loans to social-impact companies, and Enduring Planet, which provides growth capital to climate entrepreneurs.
Dimitry Gershenson, the cofounder and CEO of Enduring Planet, told the Times that within 24 hours, his group received nearly 100 applications, representing more than $500 million in assets at risk.
Climate tech has been a bright spot in the broader tech downturn, with venture-capital and private-equity funds raising $64 billion in the fiscal year that ended in November — more than double the previous year's total, according to an analysis by Climate Tech VC.