SXSW may be in Texas, but Silicon Valley Bank's implosion is casting an uneasy cloud over the tech festival

• As the South by Southwest tech conference began in Austin on Friday, Silicon Valley Bank failed.
• The annual festival is known for attracting hundreds of startup founders and tech investors.

As South By Southwest kicked off in earnest on Friday, many attendees were privately panicking.

The annual festival, which hosts thousands of attendees from across the entertainment, politics, business, and tech worlds, began its first day with the news that Silicon Valley Bank had been placed under the control of the FDIC after thousands of customers rushed to pull their money out.

Nearly half of all US venture-backed startups use the bank's services, according to its website, and in the midst of its implosion, many of them were left scrambling to secure their companies' funds.

The festival is known for attracting startup founders, employees, and investors, who participate in the many panels and networking events over the first half of the 10-day run of the conference. And many attendees, who could be seen sporting the orange "Interactive" badge, were glued to their phones and computers inside the convention center and badge holder lounge.

Jessica Lessin, founder and CEO of The Information, tweeted on Friday that the SVB news was "by far the most insane experience" of her career. Later on Friday, Lessin shared an Instagram story post showing her SVB credit card being declined while she traveled to SXSW.

"The reality of this moment is we're really waiting to see how bad things get — or if they stabilize," Lessin told Insider. She described the situation as moreso a "distraction," rather than a cloud over SXSW.

For Facebook whistleblower Frances Haugen, who is a speaker at SXSW this year, the potential ripple effects of SVB's collapse and the US government's pending action are top of mind.

"It seems likely that if the government does not step in to stop the contagion kicked off by SVB's bank run, we will see more regional (or even large) banks fail," Haugen told Insider. "I worry though that Biden will feel he can't act because of public hostility towards Big Tech, even though Big Tech will benefit from SVB taking out the startup community. It's remarkable to think the collateral damage of bad behavior by large tech firms could be financial chaos that impact Main Street."

Conway Anderson, a startup founder who flew in to Austin on Saturday, tweeted that the public chatter seemed surprisingly absent of anything around SVB's implosion, but that in private chats, founders are sharing their concerns.

"The private chats versus the public chats at South By Southwest seem very different. Most people at South By are presumably aware [of Silicon Valley Bank] but everyone wants to make the most of it, and not get too sucked into things we can't control," Anderson said.

Roku, for instance, held 26% of its cash at SVB — roughly $487 million in deposits. But in Roku City, the media company's interactive event at SXSW, things are looking A-Okay. Guests traveled through the pop-up recreation of Roku City and drank colorful themed cocktails at the bar while a DJ played dance music.

But while attendees may attempt to stay positive over the weekend, the tone could shift even more dramatically come Monday, when the markets reopen and startups and VCs will have to focus on the fallout once more.