Silicon Valley Bank’s fall raises uncertainty for health care start-ups.

As the run on Silicon Valley Bank ripples across the economy, investors in health care and biotech start-ups are grappling with a disruption to an industry that was already facing headwinds.

The bank played a significant role in this sector of the economy. Silicon Valley Bank provides services to nearly half of the country’s venture-backed tech and life sciences companies, according to its website — although the nature of the business relationships can vary widely, from holding big chunks of cash for them or their investors to making multimillion dollar loans.

Some of the defunct bank’s clients are developing new surgical devices, or cures for cancer and autoimmune disorders. Others are finding novel ways of delivering or organizing health care. What they have in common is significant risk for investors, given the years that breakthrough technologies and medical innovations can take to develop.

Friday was “very scary,” said Cait Brumme, the chief executive of Mass Challenge, a nonprofit that works with about 500 start-ups, roughly a third of which are in health care and related industries. Of the 4,000 companies that have worked with her organization, about 1,000 had some relationship with Silicon Valley Bank, Ms. Brumme said.

The government’s announcement Sunday that all of the shuttered bank’s deposits would be covered brought “relief,” she said.

But the bank’s failure will most likely spur health care companies to make sure the regional banks they use are on sound footing — a challenge that is amplified for those with money at Silicon Valley Bank.

For example, iRhythm Technologies, Inc., a San Francisco company that makes wearable devices to track heart problems, issued a Securities and Exchange filing on Monday outlining its financial ties to Silicon Valley Bank. The company listed $54.5 million in operating accounts, a $35 million loan, an undrawn $40 million loan and a $25 million revolving credit line.

The company also noted that it has holdings at other financial institutions.

“The company affirms its expectation that its cash, cash equivalents, and short-term investments held outside of S.V.B. will be sufficient to operate the company’s business and meet its cash requirements for the foreseeable future,” iRhythm said in its filing.

Ms. Brumme said health and biotech companies have already faced challenges over the past year because of rising interest rates and the threat of recession. The seizure by federal regulators of Silicon Valley Bank amplifies the challenges: “The concern is that this only accelerates the negative impact,” Ms. Brumme said.

Still, investors in these companies generally know that these are not short-term investments and are therefore arguably less susceptible to disruptions like this — if they resolve.

“What’s happening in the market has very little to do with do with the science and commercial potential over the long run,” Ms. Brumme said. “That would be the hope.”


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