How startups reacted to the collapse of Svb
Silicon Valley Bank was central to the American startup sector. A hundred venture capital companies have signed a statement in support of the bank. Facts and insights
About a hundred investment and venture capital companies (this is the name of capital invested at high risk in companies with high development and innovation potential) have signed a statement in support of Silicon Valley Bank, the US bank that went bankrupt in recent days and is very important for startups.
According to Bloomberg , the release represents an attempt by the "venture capitalist" sector to limit the consequences of the bank's collapse and avert an "extinction event" for the small tech companies that used to lean on the institute.
“SILICON VALLEY BANK HAS BEEN A TRUST PARTNER”
The approximately one hundred and twenty-five signatories of the document – including the venture capital firms Sequoia Capital and General Catalyst – describe the events of the last two days as "deeply disappointing and worrying" and declare that they will continue to have relations with Silicon Valley Bank if it were to be acquired by a other entity.
"Silicon Valley Bank has been a long-standing and trusted partner to the venture capital industry and our founders," the statement read. "For forty years it has been an important platform that has played a central role in serving the startup community and supporting the innovation economy in the United States."
WHAT THE US GOVERNMENT HAS DONE
Over the weekend, the FDIC, the US government agency that provides bank deposit insurance, used its insurance fund to cover account holders in Silicon Valley and another failing bank, Signature Bank ; however, the shareholders and bondholders of the two banks have not received protection.
Y COMBINATOR'S PETITION TO SECRETARY YELLEN
Y Combinator, a major California startup accelerator, released a petition on Saturday to Treasury Secretary Janet Yellen asking her for “relief and attention to the immediate critical impact [of Silicon Valley Bank's failure ] on small companies, startups and their employees who are depositors of the bank”.
THE DIFFICULTIES OF STARTUPS
The sudden collapse of Silicon Valley Bank – the California regulators closed it last Friday, and put it under the control of the FDIC – sent many tech investors and many startups into panic, already weakened by a climate of economic uncertainty and increase in interest rates which complicates access to credit. In 2022, venture financing in the United States fell 37 percent year-on-year, according to CBInsights data.
FarmboxRx, a health food delivery company, told CNN on Friday it did not know if or how it would be able to recover its funds deposited at the bank. Human resources platform Rippling found itself having to deal with late payments to some of its clients due to the institution's "solvency issues".
WHAT SAM ALTMAN (OPENAI) THINKS
Sam Altman, chief executive of OpenAI (the organization behind ChatGPT ) and ex-president of Y Combinator, said investors should consider offering “emergency funds to startups that need them for paychecks.” or else: no documents, no conditions, just sending money”.
WHAT BILL ACKMAN THINKS
Bill Ackman, activist investor and chief executive officer of Pershing Square, a private equity firm, wrote on Twitter that “SVB's failure could destroy a major long-term driver of the economy as venture capital-backed companies rely on to SVB for loans and operating liquidity. If private capital cannot provide a solution, a highly dilutive government bailout should be considered.
The failure of @SVB_Financial could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash. If private capital can't provide a solution, a highly dilutive gov't preferred bailout should be considered.
— Bill Ackman (@BillAckman) March 10, 2023
THE IMPACT ON ENERGY STARTUPS
“SVB has made loans to countless renewable energy companies,” Raymond James analyst Pavel Molchanov told Reuters .
Sunrun, in particular, a California-based residential PV company, had nearly $80 million in cash deposits at Silicon Valley Bank. He said the bank was one of the lenders on two of his lines of credit, but that it accounted for less than 15 percent of his total lines of coverage.
Sunnova Energy, which operates in the same industry as Sunrum but is headquartered in Texas, did not have cash or securities deposits at Silicon Valley Bank; however, one of its subsidiaries is part of a credit facility in which the bank acts as a lender.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/silicon-valley-bank-impatto-startup/ on Tue, 14 Mar 2023 07:21:39 +0000.