SVB collapse having ripping effect across US tech industry
Roku, Etsy among tech companies impacted
New York: The collapse of Silicon Valley Bank (SVB) has had a ripping effect across the US tech industry as many start-ups scramble to minimise the impact of its seizure by the federal government, the media reported.
SVB served a range of roles across the industry; it not only took startups' cash but also offered them venture debt and other loans while providing banking and lending money to venture capital firms. Its collapse is the largest bank failure since Washington Mutual in 2008.
SVB had reported banking 44 per cent of 2022's venture-backed tech and health care IPOs, and 55 per cent in 2021, Axios reported. The sudden loss of access to its funds has left Silicon Valley reeling. Roku said that SVB held 26 per cent of its cash and cash equivalents - around $487 million - as of Friday, per its filing to the Securities and Exchange Commission (SEC).
Roblox's said that SVB held around 5 per cent of its $3 billion cash and securities balance as of February 28, 2023. Space company Rocket lab USA reported that approximately 7.9 per cent of its total cash $38 million was held at SVB as of December 31, 2022.
Vimeo's filing stated an accounts balance with SVB that totaled less than $250,000, which means it will be insured by the Federal Deposit Insurance Corporation (FDIC). Etsy, the e-commerce company selling handmade and vintage items, has also been forced to delay vendor contract payments, Axios reported. A spokesperson for Etsy said in a statement that the company is working "around the clock" to find a solution and intends to pay sellers via other payment partners in the next few days.
Some startup companies have also been forced to delay payroll due to the collapse. Though most of these companies noted in their filings that they do not believe SVB's collapse will significantly hinder their operations, it remains unclear how much money they will be able to recover, Axios reported.
SVB executive, Jospeph Gentile, was a former executive of the Lehman Brothers' Global Investment Bank prior to the bank's public collapse in 2008, Fox Business reported. Prior to joining SVB as Chief Administrative Officer, Gentile worked as Chief Financial Officer at Lehman Brothers' Global Investment Bank. Gentile left Lehman in 2007, just one year before it went bankrupt in 2008, Fox Business reported.
"You can't make this up," a Twitter user wrote as the internet erupted at the revelation. "This is truly unusual," another user added.