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The\u00a0Federal Deposit Insurance Corporation’s decision to take\u00a0over Silicon Valley Bank on Friday is likely to leave many digital health companies scrambling to pay employees and suppliers.\u00a0<\/p>\n
SVB, the nation’s16th largest bank and headquartered in Santa Clara, California, was a big bank for tech companies, startups and venture capital firms. The bank said on its website that it had $78.8 billion in healthcare deposits and investments as of December.<\/p>\n
Experts say SVB’s failure is another sign the digital health venture funding market is long past its peak. Funding has slowed down considerably from the highs of 2021.\u00a0While the total for 2022 was the second-best year since Digital Health Business & Technology started tracking the data in 2010, the fourth quarter was the lowest quarterly funding total in five years. Most experts say 2023 will be worse.\u00a0\u00a0<\/p>\n
\u201cWe had a prolonged period of very low interest rates, essentially free money, and we’re unlikely to return to that type of environment,\u201d said Matt Wolf, a director and senior healthcare analyst at consulting firm\u00a0RSM. \u201cThis is the environment that digital health operators need to be accustomed to.\u201d<\/p>\n
SVB’s collapse and the quick takeover by the FDIC followed\u00a0a run by depositors on the bank Thursday. Notably, the FDIC did not wait until the close of business to seize the bank, as is typical in an orderly wind down of a financial institution.\u00a0<\/p>\n
The FDIC created Deposit Insurance National Bank of Santa Clara and immediately transferred all insured deposits there at the time of the shutdown. The regulator said all insured depositors will have full access to their insured deposits no later than Monday morning, Uninsured depositors will receive an advance dividend and a receivership dividend, and potentially additional dividend payments as bank assets are sold. Customers with accounts in excess of $250,000 were told to contact the FDIC.<\/p>\n
The bank had $209 billion in total assets at the time of failure, the FDIC said. A report from S&P Market Intelligence said that 97.3% of SVB’s deposits were uninsured.<\/p>\n
SVB was\u00a0the bank for many digital health startups and venture capital firms.\u00a0The bank was used by 76% of venture capital-back initial public offerings in healthcare since 2020, according to data cited on its\u00a0website.\u00a0<\/p>\n
Its digital health clients included home healthcare provider\u00a0DispatchHealth, which got funding from SVB for its $330 million round\u00a0in November;\u00a0primary care company\u00a0Oak Street Health, which got a $300 million credit facility from SVB\u00a0(<\/u>which worked\u00a0with Hercules Capital on the credit facility) in November; and physician enablement company Privia Health. SVB said it had $100 million in financial commitments\u00a0to Privia, according to the bank’s website.<\/p>\n
DispatchHealth said its business will continue to operate normally and directed\u00a0additional questions to the FDIC. Privia and Oak Street Health did not respond\u00a0to requests for comment.\u00a0<\/p>\n
In the hours before the FDIC moved in, digital health clients\u00a0with uninsured accounts were\u00a0attempting to remove deposits from SVB\u00a0while other banks were calling to guarantee deposits, said one financial analyst who requested anonymity to comment.\u00a0<\/p>\n