An indication hangs at Silicon Valley Banks headquarters in Santa Clara, California, March 10, 2023.
Noah Berger | AFP | Getty’s paintings
Greater than 300 enterprise capital firms signed a joint statement pledging to do business with Silicon Valley Bank again if it was “purchased and properly capitalized” after the financial institution collapsed on Friday.
Regulators shut down SVB and seized its deposits on Friday after a bank run on Thursday.
Ahead of the bank’s collapse, SVB CEO Greg Becker announced an urgent need to raise $2.25 billion to replenish the financial institution’s balance sheet on Wednesday. A dramatic wave of deposit withdrawals occurred on Thursday.
The bank’s shares plummeted and brought trading to a halt on Friday before California state regulators took over.
The collapse of SVB is the biggest US banking bankruptcy for the reason that 2008 financial crisis and the second largest in history.
Some enterprise capital firms withdrew their very own money and directed their portfolio firms to withdraw deposits from SVB ahead of the round. Reportedly, Founders Fund, USV and Coatue were amongst those that did.
Other enterprise capitalists lamented that the directives of influential firms, even if somewhat cautious, contributed to a run for a bank that has long been a trusted financial partner to tech start-ups and firms which have invested in them for a long time.
The Federal Deposit Insurance Corporation (FDIC) will cover up to $250,000 per depositor and should start paying depositors below that limit as early as Monday. Nonetheless, it stays to be seen how much of the deposits on SVB’s balance sheet shall be fully or partially recovered and whether a right away buyer will emerge to take over the bank’s operations.
In 2008, JPMorgan Chase acquired Washington Mutual Bank in a transaction facilitated by the FDIC.
As reported by CNBC, big names in technology and finance are calling on the federal government to take dramatic motion to protect depositors who haven’t reached the $250,000 insurance limit. Their predominant concern is that failing to protect deposits over $250,000 could cause them to lose faith in other mid-sized banks.
Venture capital firms including Accel, Cowboy Ventures, Greylock, Lux Capital and Sequoia were amongst 325 firms who signed a letter Saturday night in California expressing their desire to work with SVB again under new ownership.
The joint statement was shared by many individual enterprise capitalists on social networks after the collapse of the bank. It said:
Silicon Valley Bank is a trusted and long-standing partner of the enterprise capital industry and our founders. For forty years, it has been a very important platform that plays a key role in serving the startup community and supporting the progressive economy within the USA.
The events over the past 48 hours have been deeply disappointing and disturbing. Should SVB be acquired and adequately recapitalised, we’d strongly support and encourage our portfolio firms to resume banking relationships with them.”
Read the statement and Full list of investors expressing support for the SVB.