The venture capital and emerging company communities were rocked last week by the collapse of Silicon Valley Bank (SVB) and the subsequent collapse of Signature Bank. While the federal government stepped in on Sunday to assure depositors that all insured and uninsured deposits are safe and SVB is up and running through a newly formed bridge bank in an almost business-as-usual fashion in the US, the reality is that the future is unclear for the bank on which much of the community has depended for over 25 years. There is still much to learn about the situation beyond the obvious that has already been widely reported. The coming weeks will uncover more about the who, what and why of what happened; what can be done to shore up the US banking system further and avoid similar situations in the future; and whether SVB will be sold in whole, in parts, wound down or file for bankruptcy (among the many options). However, one thing that is certain at this point is that this changes the landscape in the near term for both debt and equity venture financing – the loss of SVB as a significant player, especially in the venture debt space, is a void that needs to be filled by viable alternatives beyond the current alternative of much more limited, costly, private debt sources.
I sincerely hope the community pulls together to ensure minimal fallout, not just financially but to the lives of individuals who devoted themselves to supporting the emerging company community. Stradley Ronon will be monitoring this situation closely, and we are available to assist clients impacted by this situation.