Mar 9, 2023 - Economy

Silicon Valley Bank spooks Silicon Valley

Data: Yahoo Finance. Chart: Axios Visuals
Data: Yahoo Finance. Chart: Axios Visuals

Silicon Valley Bank, long one of the most popular financial institutions among tech and life sciences startups, saw its shares fall more than 60% on Thursday, wiping out a whopping $9.4 billion in market value.

Driving the news: Several top venture capital firms, including Coatue and Founders Fund, have suggested to some portfolio companies that they strongly consider pulling money out of SVB, as concerns grow over the bank's stability.

  • Others, including Sequoia Capital, reiterated a longstanding message of diversification, via one-on-one conversations with portfolio companies.
  • Founders Fund, Coutue and Sequoia all declined comment.
  • The Information reports that Union Square Ventures told portfolio companies to "only keep minimal funds in cash accounts" at SVB.
  • Several founders have privately told Axios that they're moving funds, with a rival banker saying his form "got a lot of new clients today."

Zoom out: Some venture capitalists and founders tell Axios that they've struggled to move their money. "We've tried to do some wires that have been stuck in limbo for over two hours," explains Ryan Gilbert, founder of venture firm Launchpad Capital. In a follow-up call, Gilbert said that he finally had reached somone at SVB, which seemed to "unplug things" and most of the wires had now gone through.

  • Other venture capitalists are preaching calm, suggesting that the real problem is the panic. One tells Axios that his firm's advice to companies is to have six months of cash somewhere else, but beyond that not to contribute to a possible bank run.

The big picture: SVB announced plans to launch a $1.25 billion common stock sale, plus raise another $1 billion via other share sales, after rising interest rates sparked large losses on its Treasury and mortgage-backed securities portfolios.

  • The bank insists no cause for concern, although none of that new $2.25 billion is yet in the door.
  • It's possible that SVB is being viewed by some larger banks as an acquisition candidate.

The bottom line: Most business accounts are only FDIC-insured up to $250,000, and some of SVB's clients are clearly worried about becoming the last one in line at the proverbial ATM.

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