Silicon Valley Bank’s historic meltdown last week was largely attributed to deteriorating business conditions in the firm’s concentrated customer base and an ill-timed decision to invest billions of dollars in mortgage-backed securities.

But long-time clients and others with intimate knowledge of how SVB operated say the bank did itself no favors. Between the bank’s refusal to upgrade its technology to meet the demands of modern-day businesses and its treatment of many startup customers, SVB’s problems extended beyond its risk profile and a challenging economy.

An ex-SVB manager, who worked on risk initiatives and asked not to be identified, said the bank remained technologically stagnant even as it was a haven for startups that had an eye for cutting-edge software and products. As she described it, “the backend of the bank is all bubblegum and wires.”

Three startup CEOs who bank with SVB agreed, telling CNBC that the user experience was often clunky and at times, slow to fulfill requests.

David Selinger, CEO of physical security company Deep Sentinel, told CNBC that SVB fumbled its response to the Covid pandemic, after the government initiated the emergency payment protection program (PPP). The loans from the program were designed to allow companies to continue paying employees during the economic shutdown.

“It completely failed in the midst of all these companies needing to get their PPP funds,” said Selinger, who spent the majority of Friday trying to pull assets out of SVB.

Selinger, a former Amazon executive who has the backing of Jeff Bezos for Deep Sentinel, said his company had tried to use various automated services provided by SVB but ended up having to do everything manually, “clawing hand over foot to try to get to PPP funds, because the fulfillment didn’t work.”

“I love SVB, but that was horrible for our business,” he said. “They had written some code to try to make it faster and none of it worked.”

One CEO, who had millions of dollars housed at SVB and asked not to be named, described the bank’s system as terrible, slow and “the worst in the industry.” He said the tech looked like it was built in 2002.

In April 2020, Tech Crunch reported on other SVB customers complaining that the bank mishandled the PPP process.

CNBC sent an email to SVB’s press address requesting a comment for this story but we haven’t yet received a reply.

SVB’s swift collapse began late Wednesday, when the bank told investors that it sold $21 billion worth of securities at a $1.8 billion loss and was seeking to raise additional capital amid a decline in deposits. By Thursday, as the stock was plunging and venture firms were telling portfolio companies to pull their money, Twitter lit up with people offering advice and making pleas.

Some SVB defenders told their followers that they needed to band together and support the 40-year-old bank, which has long been central to the tech ecosystem. One startup founder, Robert McLaws, responded to a particular tweet and offered a very different perspective.

“As an @SVB_Financial customer for the last 5 years, they are terrible as an actual bank & are getting what they deserve,” wrote McLaws, CEO of BurnRate.io. “Their tech stack has not moved 1 iota, their fees are punitive, and if you’re not in SV you’re invisible.”

Villi Iltchev, a partner at Two Sigma Ventures and the author of the original tweet, responded, “I have the opposite experience. I have loved every interaction with them.”

Another founder and CEO, who’s based in Los Angeles, told CNBC he considered leaving the bank nearly a year ago after it took six weeks and five phone calls to transfer the funds needed to open the company’s head office. He has $750,000 with SVB, which is triple the amount insured by the Federal Deposit Insurance Corporation.

The FDIC seized SVB on Friday following a run on the bank by depositors. It was the second-biggest bank failure in U.S. history and the largest since the financial crisis 15 years ago.

Banking regulators devised a plan Sunday to shore up deposits at SVB, as they try to quell a feared panic over the firm. The central bank said it’s creating a new Bank Term Funding Program aimed at safeguarding institutions impacted by the SVB failure. In addition, regulators said depositors at both SVB and Signature Bank in New York will have full access to their deposits.

Roughly 95% of SVB’s deposits are uninsured, which makes the bank particularly unique in that it serves primarily businesses. However, the risk of contagion led to a plunge on Friday in shares of other regional banks such as First Republic and PacWest Bancorp.

Lack of mobile security

The former SVB manager, who was hired to prepare the bank for a rapidly growing asset base, said that implementing biometric authentication on the bank’s mobile banking app was one of its technical failures. Startup finance execs were left with a “password-based login” to protect their funds, because building authentication into the app “was seen as too expensive, complicated to do and not value additive to clients,” the person said.

Even attempts at shoring up its internal tech through a partnership with payments giant Stripe, ended up flopping, according to the former SVB employee.

In 2016, SVB announced an agreement with Stripe to launch a product called Atlas “to give entrepreneurs everywhere access to the basic building blocks for starting a global internet business.” Approved founders and execs would receive a tax ID number, a U.S. bank account from SVB, a Stripe account to receive payments from anywhere and services like tax guidance from PwC, legal help from Orrick, Herrington & Sutcliffe “and tools and credits from Amazon Web Services.”

But the ex-SVB employee said after the big announcement “technically SVB wasn’t able to pull it off on our end.” The lack of investment in SVB’s technology made the job of risk compliance difficult, the person said.

Atlas works with fintech companies Mercury and Novo, according to its website.

Stripe did not immediately offer a comment for this story.

While SVB was “undoubtedly one of the best banks” for startups, the person continued, as clients grew they were “forced to switch” because of the bank’s inferior technology.

— CNBC’s Ashley Capoot contributed to this report.

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