The Collapse of Silicon Valley Bank and Its Impact on Startups

What is SVB?

Founded in 1983, the Silicon Valley Bank (SVB) has been a popular choice for startups to secure financing, as it has been catering to the startup ecosystem for a long time, providing various financial services to help startups grow. Famous startups such as Lexion, Wrench, Kevala, Docusmart, and Icertis used SVB for venture debt. As of the end of last year, SVB had a total asset of $209 billion, according to the FDIC. However, the recent news of the collapse of SVB has sent shockwaves throughout the startup industry. Many startups are now left wondering how this collapse will affect them and their businesses.

So What Happened to SVB?

The collapse of SVB was caused by the Federal Reserve, higher borrowing costs, lower bond yields, and venture capital drying up, which left the bank sitting on a mountain of unrealized losses in bonds just as the pace of customer withdrawals was escalating. On Wednesday, March 15th, SVB announced it had sold securities at a loss and that it would sell $2.25 billion in new shares to shore up its balance sheet, triggering panic among key venture capital firms, who advised companies to withdraw their money from the bank. Trading in SVB shares was later halted, and the bank was shut down and placed in receivership under the Federal Deposit Insurance Corporation by California regulators on Friday morning.

What does this mean for Startups?

The reality is that the collapse of SVB will have a significant impact on the startup ecosystem. Startups that were solely relying on SVB for financing and banking services will face a tough time. Many startups have over-leveraged themselves and have taken on more debt than they can handle. With the collapse of SVB, these startups will now have to find alternative sources of financing, which may be difficult in the current market conditions.

This situation highlights the importance of not relying too heavily on any one institution or source of financing. Startups should be cautious in their approach and should not over-leverage themselves. Instead, they should focus on bootstrapping their business and outsourcing non-core activities to third-party service providers.

I am a Young Tech Startup What Should I Do?

Bootstrapping is a great way to keep costs under control and to ensure that the business is self-sustaining. By bootstrapping, startups can avoid taking on too much debt and can focus on building a profitable business. They can also reduce their reliance on banks and other financial institutions, which can be a significant advantage in times of financial instability.

Outsourcing non-core activities is another way for startups to keep costs low and focus on their core business activities. By outsourcing activities such as accounting, IT, and customer support, startups can save a significant amount of money and can free up valuable resources to focus on more important tasks. This strategy works particularly well for tech startups. Hiring cost for developers and engineers remains to be high, a startup that doesn’t want to over-leverage can consider outsourcing either all or a portion of their development work to reduce their overhead cost.

People-as-a-Service

Valere has built 300 successfully launched applications/software–ranging from startups to Fortune 500 companies! They have a wealth of experience developing for both consumer and B2B audiences across a myriad of verticals such as healthcare, finance, sports, fitness, education, and more! They are an award-winning software development firm that was recently recognized as the top 1% on Upwork. Their clients include fintech startups in the U.S., Fortune 500 multinational oil and gas companies, and institutions like Johns Hopkins University.

Their people-as-a-service program is designed specifically for bootstrapped startups. By integrating their team of developers, engineers, UI/UX designers, and QA managers directly into the startup working hours and culture, bootstrapped startups can enjoy using a dedicated team of developers without spending as much money on salary, equipment, and other variable costs, while reaping the benefits from working with experts who have already published winning products.

With different teams of expert developers that specialize in industries such as healthcare, fintech, ed-tech, AR/VR, Metaverse, and blockchain, Valere has already helped clients with this unique model achieve further funding or even acquisition. See how Valere Lab’s people-as-a-service can help your startup without being over-leveraged. Contact us today and let us help you address your tech challenges!

Valere is an award-winning software development agency that has built over 300 top-rated applications for startups and Fortune 500 companies in all verticals like healthcare, finance, sports, fitness, education, and more. Their apps have been featured by the New York Times, and have been consistently recognized as Apple App Store’s top featured apps, TechRadar, and Google Play Store’s top featured apps! Schedule a call?with us today to learn how we can help your team create the perfect software or application that can Accelerate Your Business Goals!

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