The failure of Silicon Valley Bank disrupts the tech community. The rout of this Californian bank dedicated to innovation could have led to a cascade of bankruptcies in the sector. But on the evening of March 12, the highest American authorities announced that all deposits would finally be protected.
The prospect of bankrupt stunts gave the 35 nightmares 000 Bank customers throughout the weekend, most of them creators of startup. Since Friday, they could no longer withdraw a single dollar from their bank accounts. However, they urgently need cash because they have to pay mid-March salaries this week. Many of them feared losing much more : this can go as far as all the capital they have raised to finance their development and which they have recklessly left in the accounts of their favorite bank. The venture capital funds that support them are also clients of the bank, hence a certain lightness in the management of capital flows. But the protection of all deposits announced on March 12 by Janet Yellen must have reassured customers.
Why do the startups Did they trust this bank so much?
Because it was created for them forty years ago. La Silicon Valley Bank then agreed to take on the risk that other conventional banks were unwilling to take on. Allowing thousands of start-ups to finance themselves and become phenomenal successes. Spotify, the platform of streaming or Beyond Meat, one of the pioneers of meat substitutes, are among its loyal customers. Half of startups Americans have an account with the SVB. This Bank is therefore a key player in financing innovation in the United States. This is also the case in the United Kingdom where it has been established for 18 years.
How will tech finance itself? ?
A bank can take over all the activities and customers of the SVB that has been auctioned. But this providential savior, if he declares himself, will he be ready to assume the same risks ? Another unanswered question today : Won’t other innovation banks endure similar problems as SVB ? On March 12, the Signature Bank was declared insolvent and placed in turn under the supervision of the Federal Deposit Guarantee Agency. These questions weaken confidence and therefore the entire structure of financing. A new test after a calamitous year. In 2022, investments intended for startups fell 30% in a sector where money had been flowing until then.
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Tech bosses begged the administration for help
And this administration that they like so much to jeer for its so-called excesses of regulation answers their call. Treasury Secretary Janet Yellen admittedly ruled out a public bailout of the bank yesterday. But in the evening, she announces that all Silicon Valley Bank customer deposits and Signature Bank will be guaranteed. A decision taken at the top of the state, in consultation with Joe Biden. In Washington, the priority of priorities is not so much tech, it is above all to avoid a remake of the financial crisis of 2008. It was necessary at all costs to reassure customers and all economic players before the reopening of the stock exchanges. The Federal Deposit Guarantee Agency is empowered to reimburse only insured accounts, up to a maximum of 250 000 dollars. This concerns only 4% of SVB deposits. The agency will therefore go well beyond its missions to save tech, banks, and perhaps the global economy from debacle.