Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Technology

Death of a Climate Bank

More than 60 percent of community solar financing nationwide involved Silicon Valley Bank.

Silicon Valley Bank.
Heatmap Illustration/Getty Images

The United States witnessed its largest bank failure since 2008 on Friday, as Silicon Valley Bank ran out of cash and was taken over by the Federal Deposit Insurance Corporation.

True to its name, the bank was central to the technology ecosystem and Northern California economy; it claimed half of the country’s venture-backed startups as customers.

But what hasn’t received as much attention is that Silicon Valley Bank was particularly important to the climate-tech sector.

“Silicon Valley Bank was an integral part of the early-stage climate tech community and I hope that they survive in some form to continue that role,” Gabriel Kra, a managing director at Prelude Ventures, told me on Friday.

Silicon Valley Bank served as a banker to dozens of climate and energy-tech companies, holding their cash on a day-to-day basis and issuing billions of dollars in loans in support of the type of large-scale, one-off projects that are essential to the sector.

The bank’s website bragged about its particular support of solar, hydrogen, and energy-storage companies. It provided more than half a billion dollars in revolving credit to Sunrun, the country’s largest residential solar company. (Sunrun did not respond to a request for comment by press time.)

And more than 60 percent of community solar financing nationwide involved SVB in some capacity, the bank claimed on its website.

The bank also published influential annual reports on the climate-tech sector, and it sponsored events for climate VCs and startups — including one at the Lake Tahoe Ritz Carlton as recently as last week.

“They were careful, thoughtful, and willing lenders to early-stage companies,” Kra said. “As a bank, they were focused on that segment of the ecosystem and they understood the risks they were taking more than a bank that wasn’t focused.”

As news of the bank’s downfall spread, at least one venture firm extended emergency support so that companies could still pay their employees.

“The downfall of SVB will launch a thousand tweet threads, but right now our focus is securing payrolls for the Lowercarbon portfolio companies whose cash is tied up so they can keep up their planet-healing work,” Clay Dumas, a founding partner at Lowercarbon Capital, a climate-focused venture fund, told me in an email.

SVB’s collapse “has consumed the time of every founder I know for the last 36 hours,” Tim Latimer, the CEO of Fervo Energy, a geothermal company based in Texas and California, said on Twitter in a response to this story.

The bank’s recent problems weren’t connected to its climate-tech or startup lending, although they did stem from its broad lack of diversification away from the startup sector and Bay Area economy. In 2020 and 2021, the bank’s clients had more cash than they knew what to do with, and the bank chose to buy bonds and other securities to earn a higher yield on deposits. But over the past few months, as startups and the tech sector writ large faced a choppier economy, many of its depositors withdrew their money — and the bank had to sell its assets, which had lost value.

Because of its large number of corporate clients, most of its clients kept balances at the bank in excess of the $250,000 in deposit insurance provided by the federal government. That means many startups are now stuck in a potentially months-long line to get their money back — if they get it at all.

“Startups need cash — they’re not run in the same way that Fortune 500 companies are run,” Kra said. “Losing access to their cash balance for potentially several months can have catastrophic effects. And a small portion of companies in the space are probably looking at that possibility and figuring out how to avoid it.”

This article was updated at 11:35 PM EST on Friday to incorporate new details and quotes.


To receive Robinson Meyer's articles directly in your inbox, sign up for Heatmap Daily:

* indicates required
  • Blue
    Robinson Meyer profile image

    Robinson Meyer

    Robinson is the founding executive editor of Heatmap. He was previously a staff writer at The Atlantic, where he covered climate change, energy, and technology.

    Climate

    AM Briefing: The Growing Cost of Hail Damage

    On the question insurers are asking, UAW’s Mercedes vote, and childhood asthma

    How Worried Should We Be About Hail?
    Heatmap Illustration/Getty Images

    Current conditions: Flooding killed nearly 100 people in Afghanistan over the weekend • Streets turned into rivers in southern Germany after heavy rain • It’s 110 degrees Fahrenheit in Delhi today, and the rest of the week will be hotter.

    THE TOP FIVE

    1. Hail damage is making insurers nervous

    Hail damage accounted for between 50% and 80% of the $64 billion in insured storm costs worldwide last year, according to international reinsurance firm Swiss Re. As storms become more frequent and more severe due to climate change, insurers are beginning to factor hail into their risk assessments on policies, Bloombergreported. Such a move could result in higher rates for policyholders. Other customers could lose insurance altogether. Some insurers are “nervous to touch big solar farms” because of the incredible damage hail can do to solar panels. One insurer has started testing the durability of various panels by pummeling them with “industrially produced hail” and seeing how well they hold up.

    Keep reading...Show less
    Yellow
    Sparks

    The Electrolyzer Tech Business Is Booming

    A couple major manufacturers just scored big sources of new capital.

    Hysata.
    Heatmap Illustration/Screenshot/YouTube

    While the latest hydrogen hype cycle may be waning, investment in the fundamental technologies needed to power the green hydrogen economy is holding strong. This past week, two major players in the space secured significant funding: $100 million in credit financing for Massachusetts-based Electric Hydrogen and $111 million for the Australian startup Hysata’s Series B round. Both companies manufacture electrolyzers, the clean energy-powered devices that produce green hydrogen by splitting water molecules apart.

    “There is greater clarity in the marketplace now generally about what's required, what it takes to build projects, what it takes to actually get product out there,” Patrick Molloy, a principal at the energy think tank RMI, told me. These investments show that the hydrogen industry is moving beyond the hubris and getting practical about scaling up, he said. “It bodes well for projects coming through the pipeline. It bodes well for the role and the value of this technology stream as we move towards deployment.”

    Keep reading...Show less
    Green
    Electric Vehicles

    Car Companies Are Energy Companies Now

    The major U.S. automakers are catching up on Tesla’s power game.

    A Silverado EV and power lines.
    Heatmap Illustration/Getty Images

    It was my first truck-powered cocktail party.

    General Motors had gathered journalists at a Beverly Hills mansion last week for a vehicle-to-home show and tell. GM’s engineers outfitted the garage with all the components needed for an electric vehicle’s battery to back up the house’s power supply. Then they tripped the circuit breaker to cut off the home from grid power and let the plugged-in Chevy Silverado electric pickup run the home’s lights and other electrical systems for the remainder of the gathering.

    Keep reading...Show less
    Blue