Hundreds of startups face a crippling cash crunch and an 'extinction-level event' if no one buys Silicon Valley Bank by Monday

Insider ^ | 3/11/23

[EBH]

Hundreds of startups face a massive cash crunch if the search for a buyer for Silicon Valley Bank drags into next week.

The Federal Deposit Insurance Corporation (FDIC) took control of SVB Friday after it was shut down by California regulators when a failed $2.3 billion capital raise sent its stock crashing.

It leaves hundreds of startups that deposited their cash with the bank in turmoil, as they try to continue operating while millions in funds are locked up.

In the meantime, signs of stress among SVB's entrepreneurial clients are beginning to emerge.

The need for startups to make payroll is one being echoed across the VC ecosystem.

In a tweet, founder Nikita Bier said: "The number of growth stage companies that had their cash at SVB is huge. Making payroll next week is going to be a s---show."

Sam Lessin, a partner at Slow Ventures, told CNBC Friday a founder he had spoken to planned to cover payrolls personally and "figure it out from there."

Even startups that didn't bank directly with SVB have been hit by its collapse. My Insider colleagues April Joyner and Madeline Renbarger reported the healthtech startup Flow Health used Rippling, which held an account with SVB, as its payroll provider.

[EBH]

The ripple effects of SVB's demise are likely to be extensive. According to its website, the bank supported nearly half of US venture-backed startups at the end of December.

[EBH]

ping

[BBQToadRibs2]

Are we looking at another “Too Big to Fail”? I hope not. SVB went woke, now they need to feel the pain of go broke.

[Freest Republican]

and make no mistake while they were stealing from savers to fund Wall St and the banks-

the free money era funded soooooooooooo much of the whackjob leftist socialist agenda. Maybe it wouldn’t be quite an extinction level event if Musk didn’t prove that 85% of their workforces are virtue signalling sjws accomplishing no actual work.

[bankwalker]

How many of these startups have goofy names that make no sense and are a hare-brained scheme of a black or female millennial that is just following their heart?

[Hambone 1934]

They did let LEHMAN BROS go down the tubes ......Maybe this will be the same scenario....

[Yossarian]

SVB went woke, now they need to feel the pain of go broke.

I'm not sure just how 'woke' SVB is/was, but I know that startups are where a lot of conservatives work in the Silicon Valley, and SVB made "just" a mistake of how they invested customer deposits a few years ago (into stable but low interest rate vehicles).

Sure, they should have clued in and made adjustments as soon as Trump made some big deficit spends against COVID, and REALLY after Biden went insane with spending that meant inflation and thus interest rates would be long-term going up.

But fundamentally, this isn't a situation like the 2000 dot-com bust where startup business models are a joke. Not every startup will make it, but at least the business plans aren't laughable.

Based on this, I fully expect someone to swoop in soon to buy up SVB.

[SteveH]

he of the perfumed hairspray should ride in on a white horse and divert funds from everyone’s favorite HSR to nowhere for a month, that should take care of it

[Mozzafiato]

Many of these startups spend like drunken sailors since the venture capitalist money is freeflowing. Lavish food spreads, private jet flights, exorbitant salaries and compensation for still unprofitable companies. Forgive me if I don’t feel sorry that they “can’t make payroll” this week. Same sob story we hear when Democrats bring up Republicans trying to hurt poor grandma or single mothers when a government shutdown is looming. Of course, we all know they WILL be bailed out, because it’s Silicon Valley and leftist’s largest contributors.

[EBH]

https://www.svb.com/how-we-help-clients/startup-banking-b

Scroll down and you can read the testimonials:

Aromy, ZipRecruiter, Zolla, Beyond HQ...and that’s just a few.

[bankwalker]

exactly what I thought ... thanks ...

[glorgau]

When I was young I remember some saying to the tune of “don’t put all your eggs in one basket”.

[rexthecat]

If you have accounts at SVB with $250,000 (each) or less, you’re safe. Anything over $250,000, it’s gone.

[Repealthe17thAmendment]

If Enron was called the Smartest Guys in the Room, it could be that SVB was the most ESG guys in the room.

[Sacajaweau]

Don’t worry...Newsome will find some kind of fund...kinda like...reparations....cuz neither should happen...

[COBOL2Java]

Based on this, I fully expect someone to swoop in soon to buy up SVB.

CHICOMM fire sale?

I'm sure Joe wouldn't mind...

[jimwatx]

SVB is a Lehman size disaster, no doubt there will be big downstream financial events from this. I predict the market will crash sooner than people thought, Black Monday perhaps.

[EBH]

SVB Collapse May Mean Billions in Losses ... - Business Insider
https://www.businessinsider.com › News
5 hours ago — At the end of last year SVB had uninsured deposits in its US offices of $151.5 billion, equal to 88% of its total deposits of $173 billion, ...

https://www.businessinsider.com/svb-collapse-may-mean-losses-no-buyer-found-by-monday-2023-3

[KarlInOhio]

and SVB made "just" a mistake of how they invested customer deposits a few years ago (into stable but low interest rate vehicles).

Sounds like the savings & loan crash in the 1980s and 90s. The banks had long term loans for revenue and short term deposits, so when interest rates went up they had to pay more for their money with no chance of earning more on their loans.

I'm shocked that SVB didn't learn the lesson that you have to match terms of assets and liabilities.

[steve86]

"Maybe it wouldn’t be quite an extinction level event if Musk didn’t prove that 85% of their workforces are virtue signalling sjws accomplishing no actual work."

Good point. If Musk hadn't proved (or proven*) it.

*Depends which style guide you use