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Okay, so here’s the Earth. That’s sweet earth, you might say.
This weekend was so busy with the collapse of a certain Silicon Valley Bank. You couldn’t go anywhere this weekend without eavesdropping on dozens of conversations and realizing that everyone in San Francisco was an FDIC and national bank bailout expert, so that’s good(?) news(??).
In Friday’s special edition of Daily Crunch, we recaped what’s happened so far, but a lot more has happened since then (literally, spiritually, and figuratively), so here’s my very best attempt to keep you Sanguinely, Vitally Briefed.
Natasha M summed it up well: It was a surreal weekend. And Bekka‘s exploration of what the collapse of SVB means for venture capital (TC+) is also worth a read.
— Hey
The overview of the TC SVB
Take a deep breath, because there is a lot of information coming out of this fire hose right now. A great place to start is Alex And Natasha trying to unpack the whole situation on today’s episode of the Equity podcast.
What do you do next? CEO of Figure Brett Adcock wrote the excellent founder’s playbook with Silicon Valley Bank accounts for TC+.
The broader ukbusinessupdates.com team has loads of news, analysis, and context. Here’s what happened the last few days:
- The dominoes wobble: First Republic bank was discontinued as its stock went into freefall after SVB’s demise, while Mercury expands FDIC insurance to $3 million through a new Vault product. Regulators also shut down crypto-friendly bank Signature Bank. While the wheels come off, regulators have asked SVB employees to stay on for the next 45 days to clean up the mess.
- But we’re okay, right? Right?: The Federal Reserve announced that Silicon Valley Bank depositors will be fully protected, although in the fast-paced world of salary-paying startups, every hour counts and it’s not clear if the Fed can act fast enough. Treasury Secretary Janet Yellen said on Sunday that the US government will not bail out Silicon Valley Bank. Y Combinator, in turn, called on Congress to take action against the collapse of the SVB.
- So about that “added value”: Venture capital is big to talk about value added – and many of them are sitting on a sizable pool of cash. This, it seems, was their chance to shine. Sam Altman, Vinod Khosla and other leading VCs say they will personally lend cash to startups as a short-term measure to cover payroll and other expenses as the whole situation spirals out of control. The ecosystem is also emerging in other parts of the value chain. Share, for example, is committing more than $120 million to support its clients, and Brex’s CEO jumped in, trying to raise more than $1 billion to cover bridge loans to keep startups afloat.
- Adopting is what we do: The startup ecosystem may rely on the banks, but it also responded quickly to the crisis. Etsy began processing seller payments through alternative partners, while some of the major players in the ecosystem, such as Life360, Sezzle, Unity, and AppLovin, disclosed their exposure to SVB in new statements. Roku, Roblox and others have disclosed their own exposure.
- A fire sale: It appears that the bank’s burning wreckage is being parceled out as SVB Financial is reportedly looking for a buyer for SVB Securities and its SVB Capital VC division, and an FDIC auction for SVB assets is said to be underway is in progress.
- International consequences: Echoes were not only heard in Silicon Valley. The whole debacle causes panic in the Chinese startup industry, and in a historic last-minute deal, HSBC bank acquires Silicon Valley Bank UK, assuring customers that all depositors’ money is safe. The reaction of the UK technology ecosystem illustrates the shock of the bank’s bankruptcy, which is reaching abroad. International regulators have frozen SVB assets in international branches in Canada and Germany, and the fallout has affected many Indian startups.
- SVB flames out, BTC skyrockets: We kind of cringed at the hot comments that “if everything was on crypto, this could have been avoided”, but crypto doesn’t give a damn about us cringe, jumping 18% in the aftermath of the SVB crisis, Jaquelyn reported.
- Could have been avoided: Investor Mark Suster says a “handful” of bad actors in VC destroyed Silicon Valley Bank.
The bankruptcy of the SVB was also discussed in our other newsletters with extra context and analysis. For example, check out this week’s fintech newsletter The Interchange.
Startups and VC
In non-bank collapse news:
Building a PLG movement on top of usage-based pricing
Image Credits: miguelangelortega (Opens in a new window) /Getty Images
Last July, Puneet Gupta, a former general manager of AWS who is now CEO and co-founder of Amberflo.io, wrote a TC+ article explaining how SaaS startups can adopt a usage-based business model.
In a follow-up published today, he shares four tactics teams can use to collect, analyze and use customer data to take the guesswork out of pricing decisions.
“When it comes time to make decisions about product packaging and pricing, the first place to turn should be the measurement pipeline for historical usage data,” he writes.
Three more from the TC+ team:
ukbusinessupdates.com+ is our membership program that helps founders and startup teams lead the way. You can sign up here. Use code “DC” for a 15% discount on an annual subscription!
Big Tech Inc.
Block monitoring firm PeckShield sent out an ominous tweet aimed at crypto lending platform Euler Finance, saying simply, “Hi, you might want to take a look”, Lorenzo reports. A series of transactions revealed an ongoing hack against Euler.
A few more to keep you busy:
