Silicon Valley Bank (SVB), the financial institution that has served the tech industry for more than 35 years, has recently been the subject of quite a bit of controversy revolving around a failed funding round, a bank run, forced receivership, and now acquisition and asset sales. SVB, which has funded more than 30,000 startups and invested in numerous tech unicorns, is a major player in the industry. The speculation regarding an acquisition has led to several questions and concerns from both the industry and SVB's stakeholders.
Throughout the past few days, intense deliberations centered around possible bail-out or acquisition options for the struggling SVB. In a joint effort, the US Treasury, Federal Reserve, and FDIC agreed to safeguard and insure the deposits of impacted SVB customers, concurrently pursuing potential buyers for the company or its assets. Despite these endeavors, the complex nature of SVB's balance sheet, containing unconventional assets like private loans against private company stock, wineries, and other esoteric assets may have hindered the identification of a prospective buyer by Tuesday morning.
As of Tuesday morning, speculation that Apollo and other private equity firms are looking to buy some of these assets, with the support of a number of venture capital firms. However, from a strategic perspective the best natural acquirer for SVB may be another, larger bank. The reason is quite simply the fact that its complex pool of loans will be hard to maintain and service if the acquirer didn’t already have significant servicing capabilities. As of Tuesday, it appears that SVB is back open for business, with accounts more or less fully functional. More importantly, it seems like existing venture debt lines are still active and being drawn down. The ultimate question for the start up and venture community is: will the ultimate acquirer of SVB continue to fund these styles of loans and continue to provide the start up community with debt capital?
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