The bankruptcy of the largest creditor with 175 billion dollars of deposits hit the world markets. The US state regulator has insured deposits up to 250 thousand – businessmen risk losing billions of dollars.
In the US, the largest startup lender Silicon Valley Bank burst. The bankruptcy of a financial institution has greatly affected global markets, and entrepreneurs can lose billions of dollars, writes The New York Times.
Several customers of the bank approached the Silicon Valley Bank branch on March 10 and saw only locked doors. The bank’s problems arose after San Francisco-based venture capital firm Peter Thiel’s Founders Fund and other well-known firms advised portfolio companies to withdraw money from the bank, Bloomberg added.
Entrepreneurs rushed to take out loans to pay wages because their money was frozen in the bank. Due to rising interest rates and the economic downturn last year, funding for start-ups has dwindled, leading to mass layoffs at many companies, cutting costs and lowering their value.
Investment in US startups fell 31% last year to $238 billion, according to PitchBook. The fall of Silicon Valley Bank exacerbated the situation, as it was considered the “financial partner of innovation.”
The fall of Silicon Valley Bank: the main facts about the financial institution
Founded in 1983, the Santa Clara, California-based bank was immediately involved in the tech ecosystem, banking nearly half of all tech and life sciences venture capital firms in the US.
The Silicon Valley Bank has been the bank for over 2,500 venture capital firms. By the end of 2022, Silicon Valley Bank had approximately 209 billion assets and more than $175 billion in total deposits.
“It was a systemically important financial institution, its services were extremely favorable to start-ups,” said Matt Oko, an investor at DCVC venture capital firm.
FDIC takes control of $175 billion in Silicon Valley Bank deposits
On March 10, the US Federal Deposit Insurance Corporation (FDIC) took control of $175 billion in Silicon Valley Bank customer deposits. Deposits up to 250,000 were insured by the FDIC, but clients have not received information when they will be given access to the money.
Silicon Valley Bank is bankrupt: how does the business react to the situation?
TV streaming company Roku said that roughly $487 million of its $1.9 billion in cash is tied to Silicon Valley Bank. The company did not insure the deposits, so it does not know to what extent it will be able to return them.
Josh Butler, CEO of security analytics startup CompScience, was unable to withdraw money from the bank.
“Everyone from my investors to my employees and my mother are reaching out to us to find out what’s going on. The big question is how soon we will get access to the rest of the funds, if at all. It’s really scary,” Butler said.
CompScience has suspended marketing, sales and hiring spending until it resolves payroll issues.
Non-tech startups also faced the fallout from the bank’s fall. Vox Media, publisher of New York Magazine and The Verge, has a significant amount of money in Silicon Valley Bank. The company’s credit cards issued by a Silicon Valley bank stopped working on March 10.
Video game maker Roblox Corp RBLX.N said it had hundreds of millions of dollars in bank deposits, Reuters reported.
Camp retail CEO Ben Kaufman sent out a letter to customers offering a 40% discount on merchandise to make up for the loss.
Some organizations benefited from the collapse of the bank. Startup financial services provider Brex has created an “emergency line of credit” for new clients transferring from Silicon Valley Bank. The service helps startups shore up payroll costs.
On March 9, Brex received billions of dollars in deposits from several thousand companies, according to a person familiar with the situation.
Recall that the owner of the OnlyFans platform, a native of Ukraine Leonid Radvinsky will receive more than $ 500 million in windfall income.
Focus wrote in July that Sri Lankan Prime Minister Ranil Wickramasinghe had declared the country bankrupt. One of the reasons for this situation is a full-scale war between Russia and Ukraine.
