Many venture capitalists are urging their portfolio companies to remove money from Silicon Valley Bank after the storied bank announced this morning that it intended to sell shares in pursuit of more capital. The move is likely to make life difficult for firms that rely on funding from SVB, as many investors may demand higher interest rates on future loans in light of the bank’s uncertain future.
Investors are concerned that a bank run may occur at SVB, as startups withdraw their capital. In theory, a bank run could cause the SVB to become upside down in terms of deposits versus demand for those funds – leading to financial difficulties for the institution. Nevertheless, some investors seem optimistic that the bank won’t face any serious problems.
Investors and entrepreneurs alike tend to be a bit picky when it comes to their financial institutions. After all, they ply their trade on the backs of trust and if a bank fails to uphold its end of the deal, it can have serious consequences for those involved.Thankfully, the banks in question seem to have addressed any potential issues head-on with newsweek reporting that Deutsche Bank has filed for an initial public offering (IPO) valued at $20 billion and Santander has announced plans to raise $5 billion. Both moves will provide much needed capital for each company while helping them strengthen their balance sheets. In an era where startups are receiving record levels of funding , these announcements bode well for continued investment in both established and up-and-coming firms worldwide
Even though its reputation has taken a hit in recent months, SVB is still considered to be one of the most powerful institutions in the startup world. With its capabilities as a bank and venture lending institution, it is no surprise that many startups turn to SVB for help getting off the ground. However, given the current market conditions, some founders have reported hearing from different venture capitalists today that they are withdrawing their funding from the bank. Whether or not this will actually have any impact on SVB’s overall business remains to be seen, but it does underscore just how highly regarded this company is within the startup community.
