Sam Altman, CEO of OpenAI, developer of the popular chatbot ChatGPT, is offering emergency funding to a number of startups to help pay employees and ensure the companies can continue to operate after Silicon Valley Bank, the 16th-largest bank in the United States, announced its collapse.
The bank, which focused on tech startups, collapsed suddenly last Friday, making it the largest bank to fail since the 2008 financial crisis. The collapse of the Silicon Valley bank has disrupted global markets, with many tech company founders worried about not being able to withdraw money to pay their employees. To avoid what startup gas pedal Y Combinator’s chief executive Chen Jiaxing called a “potentially extinction-level event in the tech industry,” industry executives moved quickly to do what they could to help save small businesses.
Alterman, who runs one of Silicon Valley’s hottest companies, OpenAI, is helping to save startups with his own money. “I had no choice, so I emailed him,” confirms Doktor Gurson, CEO of Rad AI, a radiation startup based in Berkeley, Calif. Altmann responded quickly after receiving the request, agreeing to provide at least $100,000 (currently about 695,000 RMB) in emergency funding to cover employee salaries. The funds are open-ended, with no strings attached, until he is able to repay them.
Doktor Gulson said the company relies heavily on Silicon Valley Bank, whose sudden closure means he has no money to pay about 65 employees. “A lot of people were living paycheck to paycheck, and they had mortgages to pay and bills to pay,” Gulson said.
Earlier, Gulson’s startup partners waited for eight hours on the FDIC hotline, but received no results. Multiple attempts to transfer funds from Silicon Valley Bank ended in failure.
Jack Altman, Altman’s brother, tweeted Saturday, “Sam is consistently sending money to beleaguered startups today with no additional conditions, he just says, ‘Pay me back when you can!’ ” When asked about this, Altman said, “I remember when I was running my own startup and investors were offering me help. I really needed that help, and I always tried to return the favor.”
Altman is just one of several tech executives who have offered assistance to startups affected by the collapse of Silicon Valley banks. Silicon Valley Bank was taken over by regulators on Friday after a fall in stock prices and a series of headwinds triggered a run, marking the second major U.S. bank to collapse since the 2008 financial crisis.
Fintech startup Brex announced on Friday that it will provide emergency loans to startups. They received more than $1.5 billion in loan applications from nearly 1,000 companies this weekend, said Henrique Dubugras, the company’s co-CEO. He said, “We are working to sign up with lenders by the end of tomorrow, and everyone is working hard on that.”
In a tweet last Friday as Silicon Valley Bank collapsed, Alterman encouraged investors to provide emergency funding to the startups they back without any strings attached. He said, “Even if Silicon Valley Bank can’t find a buyer or a loan over the weekend, startup deposits should be allowed to be drawn down. But in the meantime, people are facing a real liquidity crunch, through no fault of their own, and employees need to be paid as they are.”
Altman did not confirm the amount of money he has provided to Rad AI or any other startups, but Gulson said he guesses Altman has provided at least $1 million (currently about 6.95 million RMB) in funding to Rad AI and other companies. The founders of several startups confirmed that they have no way to pay their employees while waiting for further information from the FDIC on what to do with their deposits. The FDIC took over the assets of Silicon Valley Bank on Friday.
By Saturday evening, more than 3,500 company CEOs and founders representing some 220,000 employees had signed a petition started by Y Combinator calling directly on Treasury Secretary Janet Yellen and others to support depositors, many of whom are small business owners, who may not be able to pay their employees in the next 30 days. The petition advocates “stronger regulation and capital requirements for regional banks” and an investigation into any “misconduct or mismanagement” by Silicon Valley bank executives. The petition warns that more than 100,000 jobs could be at risk.
Venture capitalists are advising startups to look for alternative solutions to obtain short-term liquidity. Some firms, including LowerCarbon Capital, have offered loans to companies whose money is trapped in Silicon Valley bank accounts. LowerCarbon will provide payroll support over the next two weeks and will begin disbursing funds on Monday, its partner Clay Dumas said.
Khosla Ventures also said, “Given the rapidly changing landscape, we are in talks with more than 100 portfolio companies to assess their critical needs and plan to build bridges where we are the lead or principal investor.”