TechNexus Perspective on SVB, and Guidance to our Ecosystem of Portfolio Companies and Corporate Partners

We don’t know what we don’t know, and the failure of Silicon Valley Bank is evolving quickly, with significant potential ripple effects. That said, panic and uncertainty have already exacerbated this crisis, and we’ve held sharing our thoughts too broadly until we had actionable advice vs speculation.?

SVB has been incredibly important to the industry (and to our entire economy), banking over half of all venture-backed companies, and many TechNexus-backed portfolio companies. This is not about “Big Tech” and it’s not just about Silicon Valley... It is about thousands of small companies, entrepreneurs and teams of people, all across the country. Venture-backed companies are – and will continue to be – the engine for new jobs, innovation, and shared-opportunity for America.

With more than 200 active venture investments in the TechNexus portfolio today, SVB has been a helpful, supportive partner for many of those companies, and for many of our hundreds of co-investors (venture capital firms, founders and other institutions). Their absence will be a loss.

We understand and support responsible company leaders who moved quickly to secure their company survival, and sufficient cash to operate, though the run on the bank en masse created further instability.

The FDIC has now stepped in to take control of SVB, and put them into Receivership. Practically, this seems to mean that FDIC-insured amounts in your deposit accounts will be available by Monday, but everything beyond that amount will receive funds as the FDIC takes further action (based on a recent FDIC announcement). ?If we look at what happened with Washington Mutual in 2008, when a similar run created a liquidity issue, no depositors lost their money, above or below the FDIC limits. Deposits and assets were sold quickly to another bank and customers had access to their funds in short order.? According to the FDIC statement, SVB has more assets than liabilities.?

We don't have any more insight than what you've seen publicly reported. This is also a point-in-time observation; the situation is more than fluid, and can change quickly. That said, here are a few current observations we'd like to share:

• Having good treasury management, storing up to 6 mos of operating cash diversely (multiple banks) is good practice; similarly managing cash through sweep accounts and safer securities, with limited amounts in routine operating capital, should be a practice regardless of where you bank.?

• You may have covenants on your lines of credit or loans with SVB (or other banks) that prevent you from withdrawing too much of your cash from the bank (these covenants, and SVB's extensive, integrated relationships with venture-backed companies, may ultimately be what saves the bank – in whatever new form – from this crisis).?

• While SVB has now been taken into Receivership, that does not mean that the bank has been dissolved and all is lost. A larger institution could see value in buying SVB (though again the precipitously falling deposits makes this more difficult); or SVB in its new form might need to further shrink/tighten their balance sheet, and/or sell off equity to stabilize themselves; to any extent, the spillover effect to the broader industry and economy suggests the Fed shouldn't ignore SVB.

• The most pressing concern and instability (both short-term and long-term) might be access to SVB lines of credit; you should be immediately sourcing credit facilities from diverse sources (we recognize that's easier said than done, and SVB has been exceptional in its understanding and ability to underwrite credit to venture-backed companies). That said, we've heard from multiple banks today that are trying to acquire customers during this SVB crisis.?

In our view, SVB -- and the leaders there -- have backed risk-taking entrepreneurs for many decades, and have been there often to help when young companies struggle. They have been a cornerstone for much of our growing economy. Their partnership with venture capital and growing companies is/was both a strength and a unique risk to them.?

Our view on what you can do next:?

• If you have SVB accounts in excess of $250,000, you should contact the FDIC at 1-866-799-0959 per their recommendation.

• Evaluate your treasury management and diversely maintain sufficient operating cash

• If you have credit facilities at risk with SVB, one of your highest priorities should be reaching out to potential alternatives.

• Communicate with your payroll processor (make sure you understand THEIR exposure to SVB); communicate with your employees, and prioritize your people.

• Take a deep breath… as entrepreneurs, we understand risk and failure; it’s critically important that you protect your mental health, and the mental health of your team and their families. You can’t navigate a crisis effectively through too much fog.?

What we’re doing next:?

• We’re engaging our banking partners to determine options for our portfolio companies for both deposit relationships and credit facilities.? As we qualify these partners, we’ll let you know. If you want/need help on new banking relationships, reach out to us, and we’ll do our best to broker positive relationships.

• We’re aware that this may have reverberating impacts throughout the industry. If there is additional support, guidance, resources or introductions that you or your company may need, please reach out to us. We will leverage our networks to support you.

• We recognize that this is an unknown and stressful scenario. As always, we’re here should any of our founders need help navigating the times.