Some VC firms are encouraging their portfolio companies to pull funds out of Silicon Valley Bank while others are advising startups to keep no more than $250K

Silicon Valley Bank CEO Greg Becker on Thursday told top venture capitalists in Silicon Valley to “stay calm” …

The Information 2023-03-10 Erin Woo

Context & Ripple Effects

The advice to move deposits or cap balances at Silicon Valley Bank turns venture firms into operational advisers to their portfolio companies, not only capital providers. It also follows Greenoaks's earlier warning to founders about potential SVB problems, showing that some investors had already treated bank exposure as a portfolio-level risk.

The episode lands after VCs had urged startups to conserve cash during the downturn. Pandemic-era spending freezes and later downturn guidance made the location and availability of startup cash more consequential than during easier fundraising conditions.

First-order effects

Portfolio companies receiving withdrawal instructions must move operating cash or restrict their SVB balances, while firms following a $250K ceiling retain only a limited deposit there.
Silicon Valley Bank faces an immediate loss of startup deposits as VCs' conflicting guidance overrides CEO Greg Becker's request that investors stay calm.

Second-order effects

VCs' advice becomes a competitive service: founders can judge investors by the speed and usefulness of their treasury guidance, a divide later highlighted in accounts of smaller investors helping startups through the crisis.
Startups that distribute cash across banks take on more treasury administration, while banks serving venture-backed companies must contend with depositors acting in coordinated portfolio groups.

Third-order effects

If venture firms continue to manage banking exposure across their portfolios, startup finance shifts toward formal cash-diversification policies rather than reliance on a single venture-focused bank.
The episode reinforces a broader concentration risk: the same networks that efficiently connect startups to capital can also accelerate collective moves when confidence breaks.

The trend: Venture capital is extending from fundraising and governance into portfolio-wide liquidity management as concentrated startup banking creates shared exposure.

Discussion

@msuster Mark Suster on x
1/ More in the VC community need to speak out publicly to quell the panic about @SVB_Financial ... I believe their CEO when he says they are solvent and not in violation of any banking ratios & goal was to raise & strengthen balance sheet
@bobeunlimited Bob Elliott on x
Years ago I led research on the GFC and was way out front suggesting trillions in losses, so I know a little something about crummy banks. Getting panicked calls about the risk of SVB deposit losses, a bank with: 1) 15% tier 1 2) 40% LTV 3) 100% deposit liquidity coverage
@samirkaji Samir Kaji on x
A lot of panic re: SVB (you should see my phone/emails!). A bank run driven by panic is the real risk here, not the action of selling LT securities at loss I have no inside information as I left SVB in 2012, but know enough about banking to piece together. Quick 🧵
@kateclarktweets Kate Clark on x
I'm hearing that many VCs are advising founders to keep no more than $250,000 of funds in SVB. Here's what USV told founders in an email: Keep “only keep minimal funds in cash accounts at SVB,” that is, funds of up to $250,000. “SVB is in a severe cash crisis”
@ericvishria Eric Vishria on x
Has there been a bank run in the US over the last 50 years where depositors actually lost money? Fed can't let it happen. Would trigger more runs. Bank equity to 0? Sure. Funds tied up for a few days? Maybe. Lost money? Can't find an example.
@brianlaungaoaeh @brianlaungaoaeh on x
@atShruti ... Great to see @eileentso @passioncapital on @business talking about @SVB_Financial and the advice Passion Capital is offering is offering founders, with some context on SVB's recent expansion in Europe and the UK. Pretty level-headed and measured analysis, and nuance…
@villi @villi on x
SVB is the most important capital provider to tech startups and the biggest supporter of the community. Now is the time to support them.
@adamsternbach Adam Sternbach on x
Fuck, aren't Silvergate and SVB public companies? Here I was, all this time, thinking the simple act of registering securities with the SEC would give me all the information I needed to make informed investment decisions that would protect me.
@edmundlee Edmund Lee on x
Bank runs are typically seen as the hysteric overreaction by unsophisticated everyday people, not the mighty startup land of Silicon Valley $svb https://twitter.com/...
@davidgura David Gura on x
Morgan Stanley, in a new note: “The funding pressures facing [Silicon Valley Bank] are highly idiosyncratic and should not be viewed as a read-across to other regional banks.”
@pt Parker on x
I get why people are pulling money under the better-safe-than-sorry theory, but it sounds like we're just waiting for it to hit the market-clearing price for a private bailout, no? I think people are a bit too used to how these things play out when the assets are all crypto. http…
@amir Amir Efrati on x
NEW: Silicon Valley Bank CEO just held a call with VC firms where he asked them to stay calm during the “panic” and that the bank is fine—unless everyone tells everyone SVB is in trouble. $sivb https://www.theinformation.com/ ...
@cperruna Chris Perruna on x
Solid thread to help understand a bit about $SIVB and bank balance sheets. Silicon Valley Bank https://twitter.com/...
@danprimack Dan Primack on x
Can confirm https://twitter.com/...
@gergelyorosz Gergely Orosz on x
One thing that makes this situation escalate much faster is what made SVB successful so far: the influence of VCs. VCs advised investments to bank with SVB. So these startups did. Now VCs are telling their investments to get out, ASAP. So they do... https://twitter.com/...
@eileentso Eileen Burbidge on x
PSA from Erin Platts, CEO of SVB UK (1/x): “SVB UKs balance sheet is segregated from the balance sheet of its parent, Silicon Valley Bank. In this sense, SVB UK, Ltd. is ring-fenced from the parent and its other subsidiaries...” https://twitter.com/...
@gergelyorosz Gergely Orosz on x
Two groups can cool down the panic: 1. VCs, if communicating with another and the bank. As they can (and do!) pull the strings, even if now un-coordianted. 2. Government or a top tier bank that can guarantee all deposits in the bank. It's unlikely #1 can act in union.
@schuldensuehner Holger Zschaepitz on x
One Bank folds, another wobbles and Wall Street ponders a crisis: Silvergate's abrupt shutdown and SVB's hasty fundraising have sent bank stocks diving & sparking concerns over whether this is the start of a much bigger problem. Deutsche Bank down 6%. https://www.bloomberg.com/..…
@bobeunlimited Bob Elliott on x
Despite this picture some of the biggest venture institutions in the world - big household names - are emailing all their clients saying they need to pull their money out of SVB now.
@gergelyorosz Gergely Orosz on x
There is good reason to worry about SVB: most its customers are VC-funded startups/scaleps: 1. All of them are nimble, and won't hesitate to move *all* their holdings. 2. Almost all their CEOs & investors are active on social media, and will act swiftly on news like a bank run.
@gergelyorosz Gergely Orosz on x
What I have learned about SVB is that it is a well-run bank, its assets diversified (like most banks) and seems like it's in good shape. A bank run could mean it has to freeze payouts, though (till it liquidates positions). THAT would be very bad for startups: all funds frozen.
@siroffinance @siroffinance on x
Unrealized losses on fixed Income are nothing new. SVB is just an example of what can happen when you realize paper losses and decide to raise equity. https://twitter.com/...
@seyitaylor @seyitaylor on x
promoting a bank run for retweets is wild.
@tomgara Tom Gara on x
We're like 18 hours away from a thread guy doing here's 14 tips for getting your cash OUT of the banking system https://twitter.com/...
@birdyword Mike Bird on x
Sort of funny to think of Silicon Valley as being worried by something as prosaic and old-school as a bank run. Wasn't blockchain or microdosing or raw milk meant to solve all this?
@zck Zak Kukoff on x
I will say - SVB has consistently gone out of their way to do the right thing for startups and for the ecosystem. Now is the right time to support them
@msuster Mark Suster on x
3/ I believe the biggest risk to startups AND VCs (and to SVB) would be a mass panic. Classic “runs on the bank” hurt our entire system. People are making public jokes about this. It's not a joke, this is serious stuff. Please treat it as such
@grantbrooke Grant on x
Back on Twitter for this: As one of probably the few VC backed founders to go through a modern bank run, get your money out now. They have to say that everything is ok. If you don't have another bank account ask your investor to warehouse money in their non-SVB accounts. https://…
@grantbrooke Grant on x
At this point SVB has hours to arrange an acquisition - as a founder it's your duty to your employees and investors to limit your exposure https://twitter.com/...
@frances_coppola Frances ‘Cassandra’ Coppola on x
I agree with this. SVB is doing the right thing, raising more capital and reducing the duration mismatch on its balance sheet. Other banks need to do the same. https://twitter.com/...
@lizrhoffman Liz Hoffman on x
Emails started landing in tech founders' inboxes today: Get your money out of Silicon Valley Bank. Mounting losses and the beginnings of a bank run at tech-land's favorite lender. Scoop from me and @ReedAlbergotti https://www.semafor.com/...
@nmasc_ Natasha Mascarenhas on x
Some VCs are telling portfolio companies to remove funds from SVB, or at the very least, decentralize where they hold their assets. They are fearing a bank run. w/ @alex: https://techcrunch.com/...
@anothercohen Alex Cohen on x
I feel bad for Silicon Valley Bank right now. They have been the biggest capital partner to founders, employees, and investors over the last decade and they're being completely turned on by all of them. If SVB goes under it would be detrimental to the startup community
@benparr Ben Parr on x
Silicon Valley Bank's balance sheet issues will make startups and investors panic. They pull their money, SVB ends up in an even worse position. More bad news cycles, even more money gets pulled out. This could become a self-fulfilling prophecy.
@bryce Bryce Roberts on x
FYI- sticking with SVB.
@cullend Cullen on x
I hate banks. But as a founder, SVB was always good to me. Back in 2010 when I was a 19 year old with no connections, a question VC's always asked (snidely) as reason to dismiss me was “Who do you bank with?” So I went to SVB. They gave me an account with a $50 deposit. https://t…
@susanlitv Susan Li on x
Well that's a vote of confidence 👇 “Do NOT accept any offers from #SVB to keep your money there even if they dangle 5% interest rates in front of you,” it said #SiliconValleyBank selling $21B loan book at a $1.8B loss sparks #stockmarket selloff today https://www.theinformation.c…
@therealdansaedi Daniel Saedi on x
VCs are emailing portcos telling them to withdraw funds from SIVB... I get that large deposits aren't insured but the bank isn't technically insolvent it's just GAAP insolvent + if this was an actual firesale like WAMU one of the big boys who have been regulatory restricted... ht…
@cryptomichnl Michaël van de Poppe on x
Second bank in a week potentially collapsing. First, Silvergate looking to liquidate. Now, Silicon Valley Bank dropping 61%. The economy is not looking great, yet, Powell wants to continue and accelerate the hikes.
@benfranksaltego Richard Saunder on x
Meet the new boss, same as the old boss. https://twitter.com/...
@bdsams Brad Sams on x
“How does a cyrpto crash impact those who never invested?” - This is how...i seriously hope that SVBs financials are in a solid place otherwise this is quite alarming. https://twitter.com/...
@msuster Mark Suster on x
A good 🧵👇🏼 on SVB. Plus one add from me ... I have talked to a ton of big VCs and most WERE NOT advising portfolio to pull all deposits out. Very few were. But that's what got reported. Most suggested moving a small amount to another account in case of short term liquidity needs …
@newsynick Nick Turner on x
Can't think of too many times when telling people to “stay calm” got the desired results https://www.bloomberg.com/... via @hgmiller29 @GillianTan @mcbridesg @Katie_Roof
@edludlow Ed Ludlow on x
Venture capital community: What's your take on Silicon Valley Bank? $SIVB shoring up capital after being hit by losses on its securities portfolio and a slowdown in funding at the venture capital-backed firms it banks.... https://twitter.com/...
@nmasc_ Natasha Mascarenhas on x
@alex @msuster Another anecdote, from an SVB competitor I just spoke to: “SVB is going to be fine. They're SVB. I fully believe when SVB says that they're fine.”
@zachcoelius Zach Coelius on x
The list of billionaires, banks and private equity that would love to own Silicon Valley Bank is massive. Its very low probability they go out of business. That said, the folks there who bought $100b in 10 year bonds in 2021, at 1.7% interest are not so bright.
@nmasc_ Natasha Mascarenhas on x
This scoop earlier from me and @alex is blowing up my DMs. There's three camps: those who don't think staying at SVB is worth the risk, those who are sticking with the bank out of trust, and those who are diversifying. https://techcrunch.com/...
@lastbearstandng @lastbearstandng on x
Bob nails it here. Aggregate cash leverage at US banks in August 2008 was 33:1. Today its under 7:1. That doesn't mean financial market liquidity isn't a concern - rather, the concern sits outside large US commercial banks https://twitter.com/...
@dampedspring Andy Constan on x
Well said Bob. The VC's seem to be trying to generate a run on a bank with treasury collateral as if it's a stable coin or crypto exchange they are trying to break. Peter Thiel trying to steal the S&L like old man Potter https://twitter.com/...
@dogetoshi Steven on x
From what I understand, a lot of crypto startups and VCs use Silicon Valley Bank which is currently experiencing a smol bank run.
@dylanleclair_ @dylanleclair_ on x
On a more serious note there is more liquidity & pristine B/S in the banking system today than there was leading up to the GFC Silicon Valley Bank $SIVB is getting hammered today (-60%) because they took all of their deposits from the VC boom & YOLO longed the bond market top
@moorehn Heidi N. Moore on x
When VCs magically discover net interest margin (how banks measure their profitability) is usually a leading indicator that some wild things are about to go down in the markets https://twitter.com/...
@loganbartlett Logan Bartlett on x
SVB has been a great partner to the venture ecosystem for a long time. A shame to see so many VCs recommending myopic decisions that have the potential to compound issues.
@reedalbergotti Reed Albergotti on x
Tech founders are getting emails from investors advising that they pull their money out of SVB, but at the same time, VCs think the bank will be ok. Classic chicken and egg. Story here https://www.semafor.com/...
@bamabonds Will Slaughter on x
How funny will it be if it's Silicon Valley Bank, or all things, that finally bursts the Silicon Valley bubble?
@nickthestoic Nick on x
This is one of the most myopic stances possible. SVB is an indispensable partner to a lot of silicon valley startups. A failure would hurt everybody a lot. https://twitter.com/...
@katies Katie Jacobs Stanton on x
I don't fully understand what happened, but I'm rooting for @SVB_Financial and the team behind it. They have been one of the most important supporters of the venture ecosystem.
@rewkang Andrew Kang on x
Contagion stemming from a collapse of Silicon Valley Bank would be 10x of that of FTX given they have $170B of deposits Never too late to assess the creditworthiness/solvency of your custodians, assets, and counterparties https://techcrunch.com/...
@colingardiner Colin Gardiner on x
Having worked at the Fed I learned intimately that everything is about trust hence FDIC. Fundamentals are a meme. Words are cheap. Not passing judgment but need a notable figure to step in and backstop. https://twitter.com/...
@subes01 Sunil Rajaraman on x
I agree with this. Manifesting a bank run on Twitter is not the move we need to happen right now. https://twitter.com/...
@piratewires @piratewires on x
An investor in @JoinMeow, a firm that holds treasuries for its clients, told us that some startup founders are putting money they took out of SVB into Meow. “I've seen [over] $500m flow in so far today. Better Meow and solvent then respectable and insolvent.”
@piratewires @piratewires on x
“We are telling people to take their money out,” one VC told us. Another said “There's a famous saying 'Don't panic, but if you're gonna panic, better to panic first.'” Several startup founders have told us they've already removed their money from the SVB.
@blader Siqi Chen on x
deleted recent tweets about svb. 1. people who Know Things still believe SVB will be fine 2. fanning the flames of a bank run is a bad look for everybody and i don't want to be a contributor 3. svb is good people and good partners for the ecosystem and deserve our support
@carnage4life Dare Obasanjo on x
I repeat, it's truly incredible reading these takes about how it's literally impossible for a bank to fail due to regulations after companies described as the future of finance (crypto) that were supposed to free us from regulations have been failing since last summer. https://tw…
@jessicalessin Jessica Lessin on x
Latest on SVB. It seems smaller wires going through and bigger ones have delays, according to now about half a dozen founders we spoke to about the issue. https://twitter.com/...
@katie_roof Katie Roof on x
Our latest update on the situation with Silicon Valley Bank. $SIVB While many venture firms are advising their portfolio companies to pull their funds, the bank still has some loyal defenders https://www.bloomberg.com/...
@samirkaji Samir Kaji on x
What's likely happening: Everyone is looking to run out of a burning building that isn't really burning. But in the stampede of not wanting to be last out, everyone runs over the single lit candle burning, creating the blaze that potentially burns the building down. https://twitt…
@willmanidis Will Manidis on x
@msuster @SVB_Financial the biggest risk to SVB right now is how many principals and associates are bored, haven't seen a deal in 6 months, and are now going to cause a panic sale because they want to feel busy
@moo9000 @moo9000 on x
Matt Levine on Silicon Valley Bank. Matt is not going to run out of banking content any time soon. https://twitter.com/...
@smalter Walter Chen on x
based on the recommendation of my VCs, i am moving all of my money to a neobank that last month my VCs told me to move all my money away from
@reddogt3 Scott Redler on x
Some asked about “what happened with “SVB” financial. This was From my Marco guy “geo macro”. He's very good https://twitter.com/...
@ericabrescia Erica Brescia on x
100%. VCs are causing this unnecessarily. Shame on those of you who are fueling the fire whether than helping to quell it. I also believe Greg and team's message. Working to pull together a group to help put a stop to this. If you're interested, ping me. https://twitter.com/...
@benparr Ben Parr on x
If you are a startup that uses SVB or Silvergate, you better be tracking what's going on with them right now. Like RIGHT now. Emails are already flying out from investors to their portfolio companies.
@daveweisberger1 Dave Weisberger on x
@scottmelker Perhaps more relevant, Silicon Valley Bank made the same dumb trades as Silvergate buying long dated bonds BEFORE the Fed started raising rates and lost a similar amount when VC funding dried up and their depositors started withdrawing funds. BUT, they are ONLY down …
@msuster Mark Suster on x
Counter rumor. I'm hearing from VCs I know on email, text, DM, whatsapp ... that they want calm and don't believe SVB is going anywhere. I have many messaging me now. We are working on forming a group to share information more cohesively on what we know & advise https://twitter.c…
@christenobrien Christen O'Brien on x
As a past customer & a former employee @SVB_Financial, I agree 100% with @msuster. The amount of support SVB has given to the VC community over the years is in no small part what made our industry so successful. Now is the time to give back to an institution that gave us all so..…
@nmasc_ Natasha Mascarenhas on x
@alex panic isn't always a result of reality, it can be a result of fear. i'm also getting texts from people who are waiting to see what happens before ditching svb. a good thread from @msuster: “I would urge calm decisions based on facts.” https://twitter.com/...
@thestalwart Joe Weisenthal on x
So if you're a bank, why would you want to take the deposits of Thiel-backed companies. How valuable are such flighty deposits?
@gramblings Gautam Gupta on x
I actually did some research into this... could only find one example in the last 30 years where depositors lost money and that was $500k in total for a regional bank in Texas. And for insured funds (under FDIC limit) it has never happened since 1934. https://twitter.com/...
@carnage4life Dare Obasanjo on x
“Don't panic, but if you're going to panic, panic first” https://www.piratewires.com/ ...
@elonmusk Elon Musk on x
@anothercohen True
@shaig Shai Goldman on x
I truly believe SVB will be ok in the long run. There is a lot of concerns , anxiety and also a ton of fud. They are an important player in the community & have been consistently supporting startups/VCs for four decades. Having them remain active is a big plus.
@_peterryan Peter Ryan on x
You thought the Thiel Gawker saga was over? https://twitter.com/... https://twitter.com/...
@nmasc_ Natasha Mascarenhas on x
@alex yes, some vcs want to get their portcos out in case a bank run begins. yes, this is how bank runs begin. our reporting shows that there a real reactions from the vc community - beyond questions or fear - on the svb news
@gergelyorosz Gergely Orosz on x
There's a bank run starting at Silicon Valley Bank. If this keeps at it, it will be very bad for tech. By design, no bank can*immediately* return *all* funds. But they don't need to: as its unlikely all customers would demand it the exact same time. Except in a bank run. https://…
@msuster Mark Suster on x
5/ I believe SVB is one of 20 largest banks in the US. I do not believe the US government would like to see them fail. I know it is NOT in the Tech & VCs interests to see them fail. I believe they could only fail if everybody panics so I would urge calm decisions based on facts
@bostonjerry Jimmy Cuff It on x
LMAO @ telling people in the middle of a bank run “actually the bank says everything is fine so don't panic” https://twitter.com/...
@robaeprice Rob Price on x
Silicon Valley Bank: Everything is fine, unless maybe it's not https://www.theinformation.com/ ... https://twitter.com/...
@bearforce_won @bearforce_won on x
Do you believe the CEO or the publicly disclosed balance sheet you can actually just read instead? https://twitter.com/...
@mayazi Maya Parody on x
All banks are based on market trust more than the favor of regulators as insurance, but when the trust is lost not all runs are equal. Both SVB & SI are smaller banks that cater to a very specific industry - tech & crypto that lost value & growth dropped https://www.bloomberg.com…
@rabble @rabble on x
SVB has mostly venture backed companies as clients, and most of those are going to have CFO's who will move some portion of their assets if they can to mitigate risk. This would cause a problem even if they are otherwise healthy.... this is going to get interesting.

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