$SIVB closure & receivership is going to have a massive impact on the tech ecosystem. SVB was not just a dominant player in tech but were highly integrated in some nontraditional ways. A few things we'll see in the coming days / weeks...
One, SVB was incredibly integrated into the lives of many founders. Not just their startup's bank & lender, but also provided personal mortgages and other financial services. A whole mess for FDIC (or the eventual buyer) to unwind.
Two, any "uninsured" balances at SVB - those above $250K - are in jeopardy. FDIC plans to pay them out "as it sells the assets of SVB". Lots of startups exclusively banked with SVB as *this was a covenant of their debt*!
CEOs yesterday faced a hard choice: Pull your deposits and go into default on your venture debt or risk losing everything if the bank failed. Many chose to hold tight as SVB's outright failure seemed outlandish.
Now they may not be able to make payroll next week. Unpaid wages pierce the corporate veil, so boards are *incredibly* sensitive to employing workers they may not be able to pay.
Expect mass layoffs later today, Monday at latest.
Expect mass layoffs later today, Monday at latest.
And given the weak fundraising environment, a number of startups have been reliant on venture lenders - e.g., SVB - not aggressively pursuing amortization of debt or triggering default for covenant foot faults (e.g., cash balances). How will the FDIC handle this? Mass defaults?
Having run a startup through the GFC, this is the first thing I've seen since that is even vaguely reminiscent of that time. Total clusterfuck.
One more thing: SVB also offered *wealth management services* to many of its founders. So your corporate lender, corporate bank, personal mortgage lender, and family's wealth manager is... all one bank, which is now in FDIC receivership. Fun.
JPow got his fucking debt crisis alright
Important to note: this is now impacting companies *that don't even bank with SVB* because their payroll providers do.
https://twitter.com/Asta_de_B/status/1634265162000617482
Payroll being missed
https://twitter.com/pm/status/1634274092454150144
As for anyone using the US's support of Ukraine in the face of a genocidal invasion as a financial comparison point to advocate the government bailing out $SIVB... I'm sorry your parents raised you like that.
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