Enterprise capital companies in Seattle are advising portfolio firms to rethink their positions with Silicon Valley Financial institution amid potential funding troubles on the tech-focused financial institution.
Shares of Silicon Valley Financial institution plummeted Thursday after the agency stated it might e book a $1.8 billion loss associated to its sale of greater than $21 billion in securities. The financial institution is launching a $2.25 billion inventory sale because it grapples with declining deposits and rising rates of interest.
Fears of potential illiquid property rippled by way of the tech startup world Thursday as some companies advised founders to search for various banking choices.
SVB is a key associate for tech startups within the Seattle space and past that use it to retailer money and lift enterprise debt, amongst different providers. It was the banking associate for practically half of the venture-backed tech and healthcare firms listed on inventory markets in 2022. SVB has additionally completed co-lending offers with Seattle companies equivalent to WestRiver Capital and Lighter Capital.
Aviel Ginzburg, normal associate at Seattle-based enterprise capital agency Founders’ Co-op, stated he spoke with two “multibillion-dollar non-public firms” that had pulled cash out of their SVB accounts.
Look people, it’s not simply VCs telling different VCs and inflicting panic. Earlier than recommending any portfolio firm pulled cash out of SVB I talked with 2 multibillion greenback non-public firms that had already completed it. The quantity my complete portfolio pulls out is a fraction of that.
— aviel
(@aviel) March 9, 2023
Some startups have already reported a delay in fund withdrawal from SVB, The Info reported.
Even when traders and founders have faith in SVB’s means to remain solvent, the chance of being fallacious might trigger some to take motion.
Some are assured that SVB will survive and serve its clients.
“SVB has been working nonstop to assist its shoppers handle threat and keep away from quick time period enterprise disruption,” stated Todd Owens, CEO of Seattle startup Kevala, which raised enterprise debt from the financial institution. “I’ve whole confidence that they’ll handle by way of this.”
Extra broadly, there are considerations that SVB is the “canary within the coalmine,” stated Philip Bond, a finance professor on the College of Washington. Latest rate of interest hikes have been so massive “that they’ll check the bounds of deposit stickiness,” he stated.
“The largest threat I’d fear about is that many banks are uncovered to the identical forces that SVB is,” Bond famous. “This is able to be an enormous unfavourable shock to the economic system.”
Startup managing editor Taylor Soper contributed to this report.
Editor’s notice: Feedback from Todd Owens have been added.