Bloomberg Línea — Human resources management startup Zazos’ CEO Alexandre Maluli was warned by another fellow entrepreneur to withdraw funds from Silicon Valley Bank (SVB) just hours before the bank collapsed, and that changed everything, Maluli recounts.
“Thursday was the most chaotic day of my life,” Maluli stated in a LinkedIn post.
Earlier in the day, the entrepreneur had posted a text on the platform to explain the financial and accounting products he was using at Zazos, and said he used SVB, which the day before had announced it needed to raise $2.25 billion to replenish its capital base.
On Thursday, the day Zazos had more than one million reais (around $190,600) deposited in SVB, the bank’s shares sank 60%.
Lastro startup cofounder Jose Thomaz Pereira alerted Maluli to make the withdrawal, while Bruno Costa, CEO of Abstra, alerted Y Combinator’s group of entrepreneurs in Brazil.
“I had emailed our investor out there to see what he was thinking about the situation, and he wasn’t that worried. But as a precaution, I wanted to take the money out of SVB,” Maluli told Bloomberg Línea.
Around noon Eastern time, he called SVB to find out how to use the new interface of the SVB Go product.
About 26 hours later, California regulators and the FDIC had taken control of the bank and closed it down.
Maluli managed to send the money to Brex, a fintech run by Brazilians Henrique Dubugras and Pedro Franceschi, in Silicon Valley, around 1 pm ET, and received confirmation of the full transfer three hours later.
On Thursday, SVB received demands for funds totaling $42 billion.
“The US banking system is worse than Brazil’s. Transfers take longer there. Pix is faster. It was an anxiety waiting to get those transfers to Brex approved,” he said.
He added that, as the next step, he will open accounts in traditional banks such as Morgan Stanley (MS), where he already has a process in progress, and JPMorgan (JPM).
“I will leave it split between more traditional banks and buying government assets, because then the risk is transferred to the government and does not depend on the bank. It is more difficult for the government to fail” he said.
Founders of Brazilian startups - even those who had more than $250,000 in SVB, the limit covered by the FDIC - were able to withdraw the money in full this Monday (March 13), as the US government had assured on Sunday night (March 12). It was even possible to redeem points from the card for startups through the SVB Go platform.
Where will the money go?
Maluli said he will continue with an account at “newer banks,” but with a smaller amount of money month by month. “In Brazil I should also invest in government assets, it’s safer,” he said.
The challenge with the larger banks in the US is that opening an account is slower, according to Latitud CEO Brian Requarth. “You can open accounts simultaneously with the bankers, but it’s better to focus on fintechs as well. Meanwhile, you can focus on an intermediary company so you don’t have legal implications,” he said at a conference for entrepreneurs on Monday.
“People are also very concerned about the banking system in general, they don’t know where to put their money, and many founders want to know if they can put the amount into their personal accounts, but that can bring up some legal issues,” Andy Mattson, partner at accounting firm Moss Adams, said at the same Latitud conference.
“When you’re a bank in the United States, there’s a significant amount of compliance rules you need to follow, and many don’t want to work with the bureaucracy of dealing with tax havens.”
Generally, for a Brazilian startup to receive investment abroad, it operates with three companies: one in Brazil, one in the Cayman Islands, and one in Delaware in the US.
Dan Green, partner at law firm Gunderson Dettmer, said that JPMorgan “is very interested in increasing its capital in Latin America. They are moving much faster to get these accounts allocated.”
