Why Silicon Valley Bank’s Collapse May Spell Trouble for Healthcare Innovation

Just weeks ago, Silicon Valley Bank (SVB), a prominent financial institution that caters to startups and the innovation sector, experienced a collapse that sent shockwaves across the country. The bank’s sudden failure had far-reaching effects, including significant impacts on healthcare.

The healthcare sector has been rapidly evolving over the past few years, with many new start-ups and established companies developing innovative technologies that aim to improve patient outcomes, reduce costs, and more.

SVB played a crucial role in the growth of these companies, providing them with the funding needed to bring their products to market. The bank’s downfall left many healthcare startups struggling to secure the capital needed to continue operations, negatively affecting the workforce, the hospitals, and the patients.

Impact on Healthcare Start-ups

One of the more significant impacts of the SVB collapse on the healthcare industry was the sudden loss of funding for start-ups. While it’s unclear exactly how much money  was impacted by the bank’s downfall, the FDIC takeover “put about $175 billion in customer deposits under the control of the federal regulator.”

Start-ups largely rely on venture capital funds, which have a significant presence in Silicon Valley. The collapse of SVB meant that many venture capital firms lost access to the funding needed to support their portfolio companies, including those in the healthcare sector.

Without this funding, many healthcare start-ups may be forced to halt their pursuit of groundbreaking research and development projects.  Those projects have the potential to transform the industry and it’s likely that many of them could be abandoned, leading to a stagnation of innovation in the healthcare space.

Colliers Insight
Shawn Janus
“The collapse of SVB may cause a significant loss of jobs in healthcare, an industry that has already been plagued by years of labor shortages.”

Impact on Talent and the Workforce

The collapse of SVB may cause a significant loss of jobs in healthcare, an industry that has already been plagued by years of labor shortages. Many of the start-ups funded by the bank employ hundreds, if not thousands, of people in research and development, manufacturing, and distribution roles. Without the funding necessary to sustain their operations, many of these companies could be forced to lay off workers or shut down altogether.

The bank’s collapse also had an immediate impact on companies’ financial capacity, hindering their ability to pay invoices and make payroll. On the day the bank collapsed, the repercussions were immediate — over $100 million in wages from Patriot Software alone were impacted, leaving thousands of workers nationwide without their paychecks.

Impact on Hospitals and Health Providers

The trickle-down from this event will also make its way to healthcare providers and hospitals. As a significant player in the healthcare technology space, SVB’s collapse could stall the critical research and development of digital advancements used in hospitals and clinics.

This, in turn, will negatively impact patients who rely on new medical technologies to treat a wide range of conditions. Without the funding necessary to develop and distribute these technologies, patients may not have access to the latest and most effective treatments available.

On a more hopeful note,  First Citizens BancShares, a family-run bank in North Carolina, recently announced that it would acquire Silicon Valley Bank in a government-backed deal. While it’s hard to quantify the proportional damage this could have on the healthcare sector, the ripple effect might be felt for a long time.