Venture Capital: Troubles At Silicon Valley Bank Trigger Warnings From Top Drawer VC Firms

March 10, 2023 | Latest News, News, Venture Capital

Moody’s had downgraded the credit rating for both SVB and its subsidiary, Silicon Valley Bank, due to “a deterioration in the bank’s funding, liquidity and profitability.”

Silicon Valley Bank (NASDAQ: SIVB), a major lender to start-ups, has faced a crisis after announcing a $2.25bn share sale following a significant loss on its portfolio. The company’s shares fell by 60% and its bonds posted record declines. The shock development sent tremors through the venture capital world, with many top VC firms advising their portfolio startups to bail out from Silicon Valley Bank (SVB).

These included Peter Thiel’s Founders Fund, Canaan, Coatue Management, Founder Collective and Union Square Ventures. (Bloomberg, via Moneycontrol)

However, Silicon Valley Bank CEO Greg Becker urged clients to stay calm, and held a conference call to reassure them that their deposits were safe.

Garry Tan, CEO of Y Combinator, warned start-ups in its network that solvency risk is real and that they should consider limiting their exposure to SVB. Other venture firms, such as Activant Capital and Tribe Capital, sent emails and texts to their portfolio companies, encouraging them to transfer their SVB balances to other lenders, and helping them move their capital.

Ava Labs President John Wu said that his company had already diversified away from its reliance on SVB.

However, some VCs, such as Larry Aschebrook, founder of G Squared, and Keval Desai, founder of Shakti, stood by the bank, stating that it had supported entrepreneurs and GPs at all stages of their businesses.

Meanwhile TechCrunch reported today that several Silicon Valley Bank customers are facing difficulty withdrawing their funds from the bank, following news that the bank lost $1.8 billion in the sale of US treasuries and mortgage-backed securities.

Some users are reporting difficulty accessing their accounts, and account access controls have been restricted to “view-only” for some.

Despite this, SVB CEO Greg Becker has assured clients that the bank has ample liquidity to support its customers.

Related Story:  Silvergate Announces Voluntary Liquidation

Image credit: Wikimedia Commons

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