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SVB Learnings, Continued: 3 More Links That Make You Think

Bank runs

This is’s second batch of some of the less obvious but more provocative impacts of the Silicon Valley Bank and Signature Bank failures. Curated from around the web. You can read our first batch here.

1. Tech VCs Are Bound by a Mutually Sustaining Value System, Right? Nah

”It seems to me my top-line error about Silicon Valley Bank being fine was undergirded by two more fundamental errors:

  • First, I assumed that the venture capitalist set knew about Silicon Valley Bank’s situation.
  • Second, I assumed that Silicon Valley broadly was in the business of taking care of their own.

Last week showed that both were totally wrong: the panicked reaction to Thursday’s failed capital raise made it clear that nearly everyone in tech was blindsided by Silicon Valley Bank’s situation — which again, absent a bank run, was an issue of profitability, not viability — and the bank run that resulted made it clear that everyone, from venture capitalists to the startups they advised, were solely concerned about their own welfare, not about the ecosystem as a whole.

I don’t, to be clear, begrudge anyone this point of view, particularly startup founders: you have one runway, and even if I might give you a pass for not extending that runway a few feet with a money market fund, I absolutely understand and endorse making sure you don’t have a significant chunk of that runway vaporized in a bank run. I have more mixed feelings about the venture capitalists that advised them: on one hand, telling companies to take their money and run was right in isolation; on the other hand, the seeming lack of awareness of Silicon Valley Bank’s issues before last Thursday seems like a dereliction of duty, particularly since that lack of awareness seems to have driven the initial bout of panic.”

Stratechery, The End of Silicon Valley (Bank), by Ben Thompson

2. But Wait, There’s More: SVB Failure May Be a Setback for the Climate Transition

”SVB was one of the only places climate tech companies could turn for venture debt, a form of short-term lending for companies without assets to offer as collateral, a service Ellis and many of her peers saw as indispensable. It’s not clear exactly how much of the venture debt that the bank had extended to climate tech companies, but which was as yet untapped, remains available, although several VCs I spoke to said companies they had invested in, like Sublime Systems, were now scrambling for alternatives. That will be challenging, because these loans are typically tied to the completion of a new fundraising round.

The upshot is that even though startups’ cash may be protected by U.S. government guarantees, without SVB the climate tech financing landscape will be more constricted than it already was.”

Semafor, How SVB’s Collapse Hurts the Energy Transition, by Tim McDonnell

3. The Rescue’s Paradoxical Effect: Deepening the Reach of the Shadow Banking System

”Once you take risk out of a part of a bank’s operations, it is hard to let market principles govern the rest. We should expect, at a minimum, tougher standards on bank capital (as now exists at the biggest banks), more regulation and higher costs. As this newspaper’s DealBook newsletter has predicted, more loans will move away from F.D.I.C.-member institutions to so-called shadow banks such as hedge funds, outside the purview of regulators.”

The New York Times, The Silicon Valley Bank Rescue Just Changed Capitalism, by Roger Lowenstein

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.