What Silicon Valley Bank Means for You

Silicon Valley Bank (SVB) experienced a bank run on March 10, leading to the FDIC shutting down its doors. As an institution that has been around for 40 years, it was shocking to see this happen. This classic bank run highlights the speed and volatility of the world we live in. However, as a firm, we responded quickly and rationally to the situation.

While many articles have discussed the what, why, and how of the situation, I would like to explore: “Well, how does this affect me?”

Most startups in Asia are not clients of SVB, so they have little direct exposure to the situation. However, a number of VCs here in Asia, including Golden Gate Ventures, are clients of SVB because of the additional services they offer, making them more than ‘just a bank’. Typically, VCs have minimal funds in our bank accounts; we prefer to put it to work by investing, or leaving it with the LPs. Fortunately Golden Gate Ventures had little exposure in this tragic event (<1% of our funds).

If you’re a startup here in Southeast Asia with no SVB account, it is prudent to be aware that you will feel the effects of this situation in the next few months, if not tomorrow.

As a firm, we have had a bearish view of global markets since early last year and have continued to report that viewpoint through the end of 2023.? I honestly see Southeast Asia as the golden child globally, with a few key markets carrying the world forward through investments and strong GDP growth, like Indonesia and Vietnam.

As a CEO, it is crucial to continue keeping prudent budgets and tighter headcounts. Access to capital will remain challenging, and with less money moving around, valuations will be lower. It is not new news, but a reminder.

Startup CEOs here in Asia should email their investors the following:

1. Let them know you were not an SVB customer (helpful in extreme times like this). Or if you were, let them know about your company’s exposure and steps taken.
2. Ask your VC if they were a client of SVB, what exposure they had, and what form of damage control was taken.
3. Ask for a call to gauge their sentiment of the markets and anything you might need to be aware of to consider them as a partner in your next fundraise.

This situation could be a potential Lehman Brothers moment, triggering a ripple effect in markets across the globe. Half a year before Lehman, Bear Sterns collapsed (which we ‘almost’ recently experienced with UK Pension Funds in September, until the Bank of England rescued them.? And no one has forgotten about FTX.

Back in 2008, after Lehman came bigger dominos like Washington Mutual and AIG, leading to a global fallout.? So you can understand there is uncertainty ahead. Investors right now are extremely anxious and nervous (not the type of driver you want behind the wheel).

We expect to see SVB being sold at a discount in the next few days, even though they have an additional US$35B in assets above their deposits. Customers of SVB are insured on their first US$250k of deposits, but beyond that, it is uncertain. Many US startups banked with SVB, so there will be lots of uncertainty over the next few weeks, from startups not making payroll to raising emergency cash and shutting down.

In summary, startups and anyone else in Asia should brace for more financial impacts. Even well-capitalized startups with four or more years of runway ahead can have everything wiped out overnight. The situation is truly astonishing.??