Mixed reactions from the medtech industry in the wake of Silicon Valley Bank’s collapse

The recent collapse of Silicon Valley Bank sent tremors through the tech industry—especially among account holders. Medtech companies (and some of their funders) were among their reeling ranks.

A survey conducted by analysts at two banks that cover the device industry suggests that established medtech companies were relatively unscathed by the event.

However, startups in the industry were more exposed—through being account holders, through receiving funding from impacted VCs and accelerators (like Y Combinator), or through venture commitments from SVB itself.

How were medtech startups impacted?

As with any bank, deposits at SVB were federally insured by the Federal Deposit Insurance Corporation (FDIC) only up to $250,000. However, with an announcement from President Biden the weekend after the collapse, depositors could rest assured that they could access their funds through the FDIC the following week.

Many startups scrambled to make payroll or pay bills that came due in the days after the bank’s collapse.

Yet, the beneficiaries of SVB’s line of credit or venture commitments are feeling less lucky. Digital health startups which SVB backed venture rounds of included Privia Health, Olive, Carrot, Komodo, and DispatchHealth. 

Luckily, VC firms such as Rock Health say they are “standing ready” to step in with financing for their portfolio companies to get through this crisis.

"You don’t want a company to fail because a bank account got locked for a period of time," Rock Health founder Bill Evans said. "That's a fundamental tenant of this business. VCs manage difficult-to-manage risk. We wouldn't be good at our job if we didn’t step up to mange these risks."

Medtech startup Osso VR was worried about this exact situation when news came down about SVB’s collapse. Luckily, with the swift turnaround of access being granted to funds, they—and many other startups worried about the same fate—were able to make payroll and continue operations without interruption.

As of this writing, a new entity, Silicon Valley Bridge Bank, has been formed, and the CEO is asking SVB customers who withdrew their money to return. 

Our predictions: The road ahead for impacted medtechs

While the future appears rosier than initially expected for most companies impacted by the SVB collapse, the dust has not quite yet settled.

Healthcare finance analysts interviewed by Medtech Dive noted a few “knock-on” effects could be expected from SVB’s failures for exposed startups, such as startups potentially looking at acquisition opportunities as uncertainty about the security of small banks abounds.

We’ve discussed how our industry had been trending towards more consolidation in recent years, and we believe this event will further encourage these integrations. As expected cash runways appear shorter for impacted startups, acquisitions are a logical exit strategy.

An additional impact on our industry we’ll be watching is how emerging health startups will be treated by the new banking landscape left in the wake of the SVB crisis. Investors interviewed by Crunchbase News expressed concern that startup innovation would slow down as a result, as other banks don’t “get” ambitious emerging companies like the original SVB did.

This is a sobering prediction, as our healthcare system is in more need than ever before for ambitious innovation, especially in underfunded sectors of our industry like femtech. 

Ultimately, while SVB account holders' funds appear to be safer than initially predicted, what has ultimately suffered is the industry’s trust. We hope that SVB’s return in the form of Silicon Valley Bridge Bank will shore up confidence, and that the new entity will become a secure financial home for digital health startups to come.

For our part, we hope medtech convinces the banking industry that a healthier future is worth placing bets on.