SVB’s tech failings preceded the historic bank run, critics say

Silicon Valley Bank’s historic meltdown last week was largely attributed to deteriorating business conditions in the firm’s concentrated customer base and an ill-timed decision to invest billions of dollars in mortgage-backed securities.

But long-time clients and others with intimate knowledge of how SVB operated say the bank did itself no favors. Between the bank’s refusal to upgrade its technology to meet the demands of modern-day businesses and its treatment of many startup customers, SVB’s problems extended beyond its risk profile and a challenging economy.

An ex-SVB manager, who worked on risk initiatives and asked not to be identified, said the bank remained technologically stagnant even as it was a haven for startups that had an eye for cutting-edge software and products. As she described it, “the backend of the bank is all bubblegum and wires.”

Three startup CEOs who bank with SVB agreed, telling CNBC that the user experience was often clunky and at times, slow to fulfill requests.

David Selinger, CEO of physical security company Deep Sentinel, told CNBC that SVB fumbled its response to the Covid pandemic, after the government initiated the emergency payment protection program (PPP). The loans from the program were designed to allow companies to continue paying employees during the economic shutdown.

“It completely failed in the midst of all these companies needing to get their PPP funds,” said Selinger, who spent the majority of Friday trying to pull assets out of SVB.

Selinger, a former Amazon executive who has the backing of Jeff Bezos for Deep Sentinel, said his company had tried to use various automated services provided by SVB but ended up having to do everything manually, “clawing hand over foot to try to get to PPP funds, because the fulfillment didn’t work.”

“I love SVB, but that was horrible for our business,” he said. “They had written some code to try to make it faster and none of it worked.”

One CEO, who had millions of dollars housed at SVB and asked not to be named, described the bank’s system as terrible, slow and “the worst in the industry.” He said the tech looked like it was built in 2002.

In April 2020, Tech Crunch reported on other SVB customers complaining that the bank mishandled the PPP process.

CNBC sent an email to SVB’s press address requesting a comment for this story but we haven’t yet received a reply.

SVB’s swift collapse began late Wednesday, when the bank told investors that it sold $21 billion worth of securities at a $1.8 billion loss and was seeking to raise additional capital amid a decline in deposits. By Thursday, as the stock was plunging and venture firms were telling portfolio companies to pull their money, Twitter lit up with people offering advice and making pleas.

Some SVB defenders told their followers that they needed to band together and support the 40-year-old bank, which has long been central to the tech ecosystem. One startup founder, Robert McLaws,…