The recent collapse of Silicon Valley Bank (SVB) has sent shockwaves through the banking and startup industries, leaving many startups suffering cashflow loss and disruption. SVB had become the 16th largest U.S. bank, with investments in over half of the tech start-ups in the U.S., and its share price had been doing well in the past few years. The problem was that SVB had invested heavily in government bonds, which became a problem when global inflation and interest rates were on the rise. As a publicly traded company, SVB was forced to make this information public, and two days later the Californian regulator took possession of the bank.
The customer impact of this banking collapse has been significant. Cash on deposit has been lost, leading to a hefty hit to balance sheets, disruption to cashflow, and some startups raising concerns about their ability to make payroll and pay rent. Cybersecurity startups are particularly vulnerable, as a significant amount of investment had passed through or been deposited with SVB. Moreover, the demise of SVB has had a ripple effect on the banking sector, with Signature Bank and Credit Suisse also facing difficulties.
The light at the end of the tunnel seems to be getting clearer, however. In the U.K., HSBC has acquired the U.K. arm of SVB for the princely sum of £1. In the U.S., a new entity has risen from the ashes of SVB, stating that “The bank is open for business and new and existing depositors have full access to their money and protection for their deposits”.
The collapse of Silicon Valley Bank serves as a stark reminder that things can go very wrong, very quickly. It highlights the potential for disaster when a large percentage of a particular industry has its money in one bank.
Key Points:
• The collapse of Silicon Valley Bank has sent shockwaves through the banking and startup industries
• SVB had become the 16th largest U.S. bank, with investments in over half of the tech start-ups in the U.S.
• The customer impact of this banking collapse has been significant, with cash on deposit lost, balance sheets hit, disruption to cashflow, and concerns about making payroll
• Cybersecurity startups are particularly vulnerable, as a significant amount of investment had passed through or been deposited with SVB
• The collapse of SVB has had a ripple effect on the banking sector, with Signature Bank and Credit Suisse also facing difficulties
• The light at the end of the tunnel seems to be getting clearer, however, with HSBC acquiring the U.K. arm of SVB and a new entity rising from the ashes of the U.S. arm
• The collapse of SVB serves as a reminder of the potential for disaster when a large percentage of a particular industry has its money in one bank