Before they became giants, the world’s most powerful tech companies started out as visionary ideas. investment. Without money, these promises would not have come true. And for forty years, this funding, Silicon Valley Bank (SVB). What was one of the biggest lenders today? United States of America already out of date
Last Friday, the most prestigious bank in the industry announced bankruptcy After suffering the rise in interest rates – the largest in the country since 2008 and the second largest in history – and a liquidity crisis This fueled the panic of customers. Its main clients included startups, industry executives and more than 2,500 venture capital firms. According to Reuters, SVB had approximately $209 billion in assets and $175.4 billion in deposits. However, 90% of these deposits were not insured and only those that were insured up to $250,000. It’s yours moneynow frozen, finally evaporated.
For financial institutions, trust is everything. But when the bank announced its liquidity problem, panic spread and the largest venture capital firms in the US called for the money to be withdrawn. Customers tried to withdraw a quarter of SVB’s deposits, about $42 billion, in just 24 hours. The next day, Friday the 10th, transactions were banned and thousands of companies were trapped.
Are newbies going extinct?
The bankruptcy of the SVB puts small start-ups in a difficult position, which may result in temporary inability to access their funds. ” Google And Facebook It’s an extinction event that will set innovation back 10 years or more,” predicted Garry Tan, president and CEO of popular startup accelerator Y Combinator. helping maternity companies such as . Airbnb, coin base, Strip anyone twitch. “30 percent of companies” venture capital Those who are exposed will not be able to pay their salaries in the next 30 days,” he said.
Without access to their deposits, many startups will find it very difficult not only to pay off. employees, but also to its suppliers. Some investors may choose to write checks to companies that allow them to move forward, but many other investors have their money tied to the SVB.
While hard to predict, waves of seismic bankruptcy can hit companies in many industries. Some of those currently affected are Etsy, an e-commerce company, Roku, the maker of streaming devices, the video game platform Roblox, or the media conglomerate Vox Media. They all have billions of dollars trapped in the SVB. It is estimated that this earthquake may exacerbate the vital crisis experienced by the world market. cryptocurrencies.
Since its founding in 1983, SVB has pumped funds to companies like the multinational technology company. Ciscoe-commerce company Shopify or productive venture capital firms Andreessen Horowitz (a16z) and Sequoia Capital while still in diapers. Experts point out that the risky loans offered by the bank to new ventures play a key role in raising the innovation ecosystem it has transformed into. Silicon valleyThe haven of the American tech industry. They went to the SVB because the banks did not give loans to young entrepreneurs.
The fall of the SVB came at a turbulent time for the tech industry. After almost two decades of easy access to money, the rise in interest rates and inflation led to a period when stock valuation plummeted, cuts investment and personnel. More than 161,000 employees were laid off worldwide last year, and another 128,000 professionals have been laid off so far in 2023. Still, the bankruptcy is not expected to hit the heavyweights of the industry. “Big tech doesn’t care,” said Tan, “they already have money elsewhere.”