Impact of Silicon Valley Bank's collapse on climate tech

The Silicon Valley Bank, or SVB, had a solid reputation a few months ago as a climate bank, but this reputation has since diminished. It was a lending institution that served innovative climate tech companies, lent money for small solar projects, and had more than 1,500 firms as customers which were involved in climate and sustainability work. 

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SVB collapsed last week. SVB was taken over by US regulators on Friday after a liquidity crunch turned into a run on the bank. That didn't calm startups worried about how they'd pay their employees, or venture capitalists trying to shore up support. On Monday, companies regained access to deposits, but there are still headaches ahead, especially for the climate tech sector.

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“Our operations could continue to be funded because we had money across institutions. This made us relatively fortunate," said Austin Sendek, CEO of materials startup Aionics Inc. on this week's Zero podcast. “Several entrepreneurs and early-stage companies didn't know if they would be able to make payroll on Monday. While we knew we could do it, if that money disappeared, the long-term outlook would have been pretty grim." 

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Researchers at Trade Algo report that investors pumped $59 billion into climate technology companies in 2022, up 4% from a year earlier. It is possible that the SVB debacle will dull some of that interest.

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Aionics, for instance, uses artificial intelligence to find new materials that can reduce cement and steel emissions and make batteries cheaper. Inflation Reduction Act measures such as this one encourage the US government to see such companies grow to their full potential. It's also a company that needs money upfront in order to hire the right people. Due to the collapse of SVB, the injection of capital is less certain.

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“We're entering an environment in which venture capital appears to be drying up. "So we need to protect the money and hunker down and build," Sendek said. “I think this is a tough time for this to happen. We're at a point where having money in the bank is something we shouldn't take for granted."

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A large part of the clean-energy industry is waiting to see which financial institutions will move in to take over the role SVB played in the market: an institution willing to work with young companies working on big ideas to decarbonize the world in the medium term.