When news broke that Silicon Valley Bank was in dire trouble, US investors, who still have vivid memories of the global financial crisis, naturally panicked. 

A group of about a dozen tech founders with cash with SVB reportedly went to SVB's Manhattan location on Park Avenue, journalist Eric Newcomer said in an online post.

According to Newcomer, who writes a newsletter on "the inner workings of the startup industry", one of the founders who showed up at the bank branch was former Lyft executive Dor Levi.

Levi confirms this in a LinkedIn post he made three days ago, noting, "SVB was our 'safe' bank with the largest allocation compared to our other accounts".

But as news of SVB's dire situation unfolded — on March 8, Silicon Valley Bank (SVB) reported a $US1.8 billion loss on its sale of US Treasury securities - investors got nervous. 

Levi says he became "More concerned by text messages, emails, and notes about VCs telling their Portcos (portfolio companies) to move funds out".

By the time Levi and the other investors decided to pull their money from the bank, the "SVB site was down, my account was blocked, and bankers were unreachable".

Levi says it took "About 16 hours for SVB support to unblock my account" and he also "Went to the NY branch as it opened to try and get a cashier's check".

He says US building managers at SVB's Manhattan branch "Called the cops" on him and the other investors who had shown up to get their money.

A photo taken by Levi and posted on Newcomer's site shows the New York Police Department's vehicle outside the bank.

Silicon Valley Bank was shut down on Friday morning by California regulators. Shares in the bank fell 66% just before the news of the collapse.

Based in Santa Clara, and with about $US200 billion in assets, SVB was the 16th largest bank in America, making it the biggest bank failure since the global financial crisis of 2008.

About half of all venture capital-funded startups in the US are customers of SVB. That's about 65,000 startups.

As SVB depositors began withdrawing their money, prominent venture capital firms began advising the companies they invested in to pull their business from SVB.

Unlike the global financial crisis, when regulators were criticised for moving too slowly, this time the reaction was swift.

On Monday (Australia time), Treasury Secretary Janet Yellen (Above), Federal Reserve Board chair Jerome Powell and Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg announced "Decisive actions to protect the US economy" by ensuring that depositors would be protected.

Despite that, there are fears that the collapse of Silicon Valley Bank could still have ripple effects across the globe.

It also comes amid the collapse of two other banks: Silvergate Capital, a central lender to the crypto industry, which said last week that it would be winding down operations and liquidating its bank.

And Signature Bank, which also had a strong crypto focus but was much larger than Silvergate, was seized on Monday morning (Australia time) by banking regulators.

Daniel Ives, the managing director of US-based Wedbush Securities, said that while regulators should be applauded for moving fast to protect depositors, the collapse of SVB will change the tech startup scene for good.

He says SVB was "An artery" for tech startups and venture capital financing for decades, and its disappearance could leave startups struggling to get funding.

As a result, he fears some startups could go under, while others may be forced to merge.

Meanwhile, Betashares chief economist David Bassanese fears the collapse of SVB could spark a US recession, which would in turn exacerbate Australia's current economic problems and raise the risk of a recession here.

Australia's tech sector has also been caught up in the collapse:

Companies effected include Canva which has money tied to the financier through the nation's major venture capital funds.

A spokesman for Canva said the company was "in the fortunate position of having the majority of our cash outside of their banking system and have safety nets in place to ensure our operations aren't compromised".

But Canva also warned of the contagion effect.

"Not everyone is as lucky as us and we'll be on the lookout over the days and weeks to come to see if there are ways we can be supportive of the broader ecosystem," Canva said.

Software maker Nitro says about US$12.18 million of the company's global cash reserves are held on deposit at SVB.

The company said it was "Engaging regularly with its customers and partners to minimise the impact of any disruptions" and that it "is in the process of evaluating short-term funding solutions to address any immediate operational requirements".

Treasurer Jim Chalmers said they were aware Australian firms were impacted and the government was monitoring "Potential impacts for Australia caused by the collapse".

"The initial advice we have received from regulators is that any fallout for Australia's broader financial system is unlikely to be significant," Chalmers said.

Original Story By | Nassim Khadem