“It doesn’t smell good right now, and there’s a lot of panic,” one venture investor who spoke with dozens of SVB clients and requested anonymity told Fortune Thursday.

The unnamed sources told CNBC that SVB Financial’s attempts to raise funds to strengthen its balance sheet have been unsuccessful and the bank had hired advisers to explore a potential sale. However, the sources added that a massive run on the bank is happening, and deposit outflows are challenging potential buyers’ efforts to realistically assess the bank’s status.

The Information also reported Friday that bankers are actively assessing SVB as an acquisition target, but that big banks are unlikely to step forward as buyers, with customers continuing to flee the bank.

Silicon Valley Bank is known for lending to higher-risk tech and crypto startups, with over half of its relationships involving venture-backed U.S. companies. But with interest rates rising and inflation proving to be stubborn, along with some spectacular blowups for venture capital in the bear market and Crypto Winter of 2022, the sector is suffering. Deposits at the bank have dropped dramatically just as rising rates have hurt the value of SVB’s bonds and loans, and a sudden spate of withdrawals on Thursday prompted SVB CEO Greg Becker to hold a Zoom call with venture firms that afternoon, The Information reported. “We have been supporting you and your startups for 30 years. We now ask you not to panic,” he said. They ran for the exits instead.

Silicon Valley venture capitalists are worried about the fallout from the bank’s issues, arguing that it is critical to the fabric of the startup industry.

Becker, seeking to assuage fears about “a run” on his bank, also sent emails seen by Fortune saying that “SVB is well-capitalized” and “has a high-quality, liquid balance sheet.” But the credit rating agencies Moody’s and S&P Global both downgraded SVB Financial’s debt to just one notch above a junk rating after news of its capital raise broke, citing a “weaker funding profile.”

Silicon Valley Bank’s issues also caused a widespread selloff in financial services stocks Thursday as investors feared contagion, with the four largest U.S. banks losing $52 billion in market cap in a single day. And the billionaire investor Bill Ackman warned Thursday that the failure of Silicon Valley Bank could “destroy” the VC space, which is a “long-term driver of the economy.” He argued that the bank is “too big to fail” and the government should step in to save the day if necessary, raising the specter of 2008-era contagion in the financial services space that sparked the Great Financial Crisis.

“If private capital can’t find a solution, a highly dilutive government bailout should be considered,” Ackman tweeted.

SVB did not immediately respond to Fortune’s request for comment.

Update: The Federal Deposit Insurance Corporation (FDIC) officially closed Silicon Valley Bank by midday Friday and created the Deposit Insurance National Bank of Santa Clara (DINB) to protect insured depositors.

“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023,” officials wrote in a statement. “The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”