Twitter fuels run on Silicon Valley bank

Twitter stokes panic
Anxiety in the tech world escalated quickly through social media, mostly Twitter, last week. “SVB” (Silicon Valley Bank) was mentioned about 200,000 times on Twitter last Thursday, with the founders and CEOs of several tech companies posting about withdrawing money from the bank. These outstanding figures in the technology field are the old customers of Silicon Valley Bank for many years, but they have fallen into trouble.

“Well, I’ve heard from dozens of founders how to deal with the Silicon Valley banking crisis, and it’s going to be an all-out bank run,” Howard Lerman, founder of technology startup Yext, said last week. Four tweeted that at the time Silicon Valley Bank was trying to raise fresh capital.

“The reason for a bank run is that there is no benefit to keeping money in a bank that is at risk,” Xavier Helgesen, founder of venture capital firm Enduring Ventures, wrote the same day.

By Friday, depositors had attempted to withdraw $42 billion in deposits from Silicon Valley Bank. The bank was shut down by regulators and taken over by the FDIC.

No bank has ever failed before so fast.

“The crisis and the rapid development of social media tell us that technology is making the existing regulatory structures built in the 1930s obsolete,” he said. “In a tech-savvy environment, the whole system needs to be looked at differently.”

During the S&L crisis, a “loss of confidence” led to a “panic” among depositors, but it spread over weeks, not hours. That helped regulators and government workers calm the panic and work aggressively to stop the run, Vartanian recalls.

“When we shut down savings and loan banks to prevent runs, we used to have the banks stack cash in the teller windows so people could see it, to ease people’s psychological concerns. One thing that happened a lot was that people saw the teller There is still a queue to get the money out, but they put it back right away. The psychological element of having the money in their hands calms them down,” Vartanian said.

News on twitter sparks panic
But he added that this stop-gap measure no longer appears to be feasible today because “information is so instantaneous now that disinformation can spread in an instant”.

Ironically, the investors and founders with the greatest exposure to SVB were the very same people who quickly stoked the panic that ultimately led to SVB’s collapse. “Our industry shot itself in the foot,” says venture capitalist Mark Suster. His call for calm last Thursday was largely ignored.

Delete inflammatory tweets
Siqui Chen, founder and CEO of financial software startup Runway, deleted some of his tweets about SVB and admitted on Monday that “fomenting a bank run sucks for everyone, and I don’t want to be a pushover.” .

However, it’s a little late.

Grant Brooke was another founder who deleted a tweet about SVB last Thursday, though he did not explain why. One of his deleted tweets read: “At this moment, SVB has a few hours to arrange an acquisition. As a founder, it is your responsibility to limit your exposure for your employees and investors.” He said in another deleted tweet “As probably one of the few founders who have experienced a modern day bank run, get your money out now. They have to say all is well. If you don’t have another bank account, just Deposit funds in non-Silicon Valley bank accounts of your investors.”

Some tech moguls with accounts at Silicon Valley Bank even deleted their tweets in support of the bank. Jason Lemkin, a prominent venture capitalist and advisor, tweeted last Thursday: “Keep our $13 million in Silicon Valley Bank. That’s it.” The article was deleted, and he responded to CNBC saying: “I was wrong.”

Bloody Monday
Meanwhile, tech founders turned investors Jason Calcanis and David Sacks have been tweeting about SVB since last Thursday. By Friday, Calcanis called the Silicon Valley Bank’s situation “alert one” and the need for a bailout.

“Next Monday, 100,000 Americans will be lining up at their area banks to get their money, and most won’t get it,” Calcanis wrote in a tweet, calling March 13 “Monday Bloody Monday”.

Calcanis says most people don’t get money
On Sunday, Vivek Ramaswamy, an entrepreneur and conservative activist, noted that VCs and some founders appeared to be “going out of their way to spread the word that there’s going to be a bank run on Monday.” As a result, he drew an angry response from Sachs.

“Fake populist psychopath who simultaneously opposes responsible measures to prevent a banking crisis while also preannounced his plan to blame the ensuing chaos on those of us who were trying to avoid it. Get this guy out of the Oval Office The farther the better,” Sacks wrote.

Take Social Media Seriously
Sachs’ tweet was also deleted. Yet attempts to rewrite the scare of the past four days continued.

Chen, who deleted an earlier tweet about SVB, tweeted again on Monday that Calcanis and Sachs’ warning was actually to “prevent a massive bank run for which they knew they would be blamed.” “.

Matt Ocko, co-founder of CVC, a Silicon Valley venture capital firm, agrees that without creating “publicity and a sense of urgency” on or through social media, “the people in power have probably been sleeping and screwed up.” nation.”

How another bank will avoid the same fate as SVB in the future is unclear. One founder’s suggestion is that banks take social media more seriously. “The same types of tactics that can be used to rig elections can also be used to weaken banks,” he said.

But for the defunct Silicon Valley Bank, its Twitter account has been completely deleted.

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BuzzFeed disclosed this situation in its fourth quarter 2022 earnings report. The earnings report showed that BuzzFeed’s advertising revenue for the quarter plunged 27% year-over-year to $50.5 million. Meanwhile, “content revenue” fell 9% year-over-year to $54.8 million. This revenue was primarily generated from customized content produced for marketers. Overall, BuzzFeed’s fourth-quarter revenue declined 8% to $134.6 million, while full-year 2022 revenue increased 10% year-over-year to $436.7 million, resulting in a net loss of $201.3 million.

BuzzFeed’s outlook for the first quarter of 2023 is similarly poor, with total revenue expected to be $61 million to $67 million, down by up to 33% from the same period in 2022. The negative factors that affected the company’s business in the fourth quarter, namely the weak macro economy that weighed on advertiser spending, will continue into the first quarter.

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The bank, which focused on tech startups, collapsed suddenly last Friday, making it the largest bank to fail since the 2008 financial crisis. The collapse of the Silicon Valley bank has disrupted global markets, with many tech company founders worried about not being able to withdraw money to pay their employees. To avoid what startup gas pedal Y Combinator’s chief executive Chen Jiaxing called a “potentially extinction-level event in the tech industry,” industry executives moved quickly to do what they could to help save small businesses.

Alterman, who runs one of Silicon Valley’s hottest companies, OpenAI, is helping to save startups with his own money. “I had no choice, so I emailed him,” confirms Doktor Gurson, CEO of Rad AI, a radiation startup based in Berkeley, Calif. Altmann responded quickly after receiving the request, agreeing to provide at least $100,000 (currently about 695,000 RMB) in emergency funding to cover employee salaries. The funds are open-ended, with no strings attached, until he is able to repay them.

Doktor Gulson said the company relies heavily on Silicon Valley Bank, whose sudden closure means he has no money to pay about 65 employees. “A lot of people were living paycheck to paycheck, and they had mortgages to pay and bills to pay,” Gulson said.

Earlier, Gulson’s startup partners waited for eight hours on the FDIC hotline, but received no results. Multiple attempts to transfer funds from Silicon Valley Bank ended in failure.

Jack Altman, Altman’s brother, tweeted Saturday, “Sam is consistently sending money to beleaguered startups today with no additional conditions, he just says, ‘Pay me back when you can!’ ” When asked about this, Altman said, “I remember when I was running my own startup and investors were offering me help. I really needed that help, and I always tried to return the favor.”

Altman is just one of several tech executives who have offered assistance to startups affected by the collapse of Silicon Valley banks. Silicon Valley Bank was taken over by regulators on Friday after a fall in stock prices and a series of headwinds triggered a run, marking the second major U.S. bank to collapse since the 2008 financial crisis.

Fintech startup Brex announced on Friday that it will provide emergency loans to startups. They received more than $1.5 billion in loan applications from nearly 1,000 companies this weekend, said Henrique Dubugras, the company’s co-CEO. He said, “We are working to sign up with lenders by the end of tomorrow, and everyone is working hard on that.”

In a tweet last Friday as Silicon Valley Bank collapsed, Alterman encouraged investors to provide emergency funding to the startups they back without any strings attached. He said, “Even if Silicon Valley Bank can’t find a buyer or a loan over the weekend, startup deposits should be allowed to be drawn down. But in the meantime, people are facing a real liquidity crunch, through no fault of their own, and employees need to be paid as they are.”

Altman did not confirm the amount of money he has provided to Rad AI or any other startups, but Gulson said he guesses Altman has provided at least $1 million (currently about 6.95 million RMB) in funding to Rad AI and other companies. The founders of several startups confirmed that they have no way to pay their employees while waiting for further information from the FDIC on what to do with their deposits. The FDIC took over the assets of Silicon Valley Bank on Friday.

By Saturday evening, more than 3,500 company CEOs and founders representing some 220,000 employees had signed a petition started by Y Combinator calling directly on Treasury Secretary Janet Yellen and others to support depositors, many of whom are small business owners, who may not be able to pay their employees in the next 30 days. The petition advocates “stronger regulation and capital requirements for regional banks” and an investigation into any “misconduct or mismanagement” by Silicon Valley bank executives. The petition warns that more than 100,000 jobs could be at risk.

Venture capitalists are advising startups to look for alternative solutions to obtain short-term liquidity. Some firms, including LowerCarbon Capital, have offered loans to companies whose money is trapped in Silicon Valley bank accounts. LowerCarbon will provide payroll support over the next two weeks and will begin disbursing funds on Monday, its partner Clay Dumas said.

Khosla Ventures also said, “Given the rapidly changing landscape, we are in talks with more than 100 portfolio companies to assess their critical needs and plan to build bridges where we are the lead or principal investor.”

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Silicon Valley Bank is the 16th largest bank in the United States, focusing on PE / VC and technology-based enterprise financing, mainly providing financing for technology start-ups supported by venture capital institutions. Its customers are highly concentrated in high-tech start-up companies, and nearly half of the country’s technology start-ups have financing with Silicon Valley Bank. It is reported that Silicon Valley Bank’s main profit is to provide short-term bridge loans to VC/PE, and this business accounts for about 56%.

People in Silicon Valley and the financial community have called on the U.S. federal government to push another bank to assume responsibility for its assets and liabilities following the collapse of Silicon Valley Bank. According to the statement, the FDIC will provide $250,000 in insurance for each SVB depositor, but most SVB depositors have more than that amount in deposits, including a large number of startups. Analysts believe that the bankruptcy of Silicon Valley Bank may trigger widespread closures and layoffs in the technology industry.

With the bankruptcy of Silicon Valley Bank, many domestic start-ups are also worried about being affected and affected. On the 11th, Silicon Valley Bank’s joint venture bank in China, “SPD Silicon Valley Bank”, issued an urgent statement stating that the company has an independent balance sheet.

Silicon Valley Bank went bankrupt overnight after being run on $42 billion
The collapse of Silicon Valley Bank can be described as very sudden. Affected by business, Silicon Valley Bank has no retail business and does not accept personal savings deposits. Its external loan funds mainly come from the deposits of venture capital institutions and the deposits of start-up companies that have obtained financing.

Before the market opened on March 9, US time, Silicon Valley Bank issued an announcement announcing that it would sell all of its US$21 billion of marketable securities, which would result in a loss of US$1.8 billion, and sought to raise US$2.25 billion through the sale of equity.

After Silicon Valley Bank announced the above news, there were a lot of doubts about Silicon Valley Bank’s ability to pay, and some fast-moving venture capital funds began to withdraw funds from Silicon Valley Bank. Shares of Silicon Valley Bank fell more than 60% at the close of trading on Thursday.

During the pre-market trading session of the US stock market on March 10, as investors panicked, the share price of Silicon Valley Bank fell by 68% again. Silicon Valley Bank immediately announced the suspension of stock trading, and the management tried to pay for deposits and withdrawals through emergency financing, selling stocks, etc. in exchange for liquidity, but all efforts failed. Silicon Valley Bank was declared bankrupt on the 10th, and the FDIC took over.

According to foreign media reports, a document submitted by California regulators in the United States showed that as of March 9, Silicon Valley Bank customers had withdrawn a total of US$42 billion in deposits, and Silicon Valley Bank’s cash balance was negative US$958 million.

The sudden bankruptcy of Silicon Valley Bank has caused heavy losses to the venture capital circle. According to media reports, many venture capital funds have not yet come and successfully transferred the money out. Once the start-up company’s money is not withdrawn in time, there may be problems with salary payment.

All investment depositors will have untill March 13, 2023 to fully receive their investment deposits, according to an announcement from the FDIC, the administrator of Silicon Valley Bank. The FDIC will issue advances to uninsured depositors within the next week. Uninsured depositors will receive a certificate of receivership for the remaining amount of the uninsured fund. With the FDIC selling Silicon Valley Bank’s assets, there could be future dividend payments to uninsured savers.

In addition, Silicon Valley Bank has 17 branches in California and Massachusetts. Silicon Valley Bank’s headquarters and all branches will reopen, March 13, 2023. As of December 31, 2022, SVB had total assets of approximately $209 billion and total deposits of approximately $175.4 billion. At the time of settlement, the amount of deposits in excess of the insurance limit has not been determined. Once the FDIC has more information from the bank and the customer, it will determine the amount of the uninsured deposit.

SPD Silicon Valley Bank issued a statement
The sudden bankruptcy of Silicon Valley Bank in the United States has made domestic companies, especially many US-dollar VC / PE and start-up companies, worried about being affected and affected.

SPD Silicon Valley Bank, a joint venture bank established by Silicon Valley Bank of the United States and Shanghai Pudong Development Bank in China, issued an urgent announcement on the 11th that: SPD Silicon Valley Bank was established in August 2012 and is a legal person bank registered in China. SPD Silicon Valley Bank has a standardized corporate governance structure and an independent balance sheet. As China’s first technology bank, SPD Silicon Valley is committed to serving Chinese science and technology companies, and has always operated steadily in accordance with Chinese laws and regulations.

According to information, Shanghai Pudong Development Silicon Valley Bank is held 50% by Shanghai Pudong Development Bank and Silicon Valley Bank.

According to the 2021 annual report released by Shanghai Pudong Development Silicon Valley Bank, about 98% of the companies it serves are Chinese local science and technology companies. As of the second quarter of 2021, the bank has served more than 3,000 corporate customers.

At present, it is not clear the impact of the bankruptcy of the US Silicon Valley Bank on related domestic businesses.

Many analysts believe that the bankruptcy of Silicon Valley Bank is due to the maturity mismatch caused by “borrowing short to buy long” (that is, short-term funding sources and long-term use of funds) under the high interest rate environment brought about by the Fed’s rapid and substantial interest rate hikes ( Due to the mismatch between the term of the asset end and the term of the liability end).

Regarding the sudden bankruptcy of Silicon Valley Bank in the United States, Internet investor Zhuang Minghao posted on his Weibo: “If we say that in the past 20 years, the Internet + VC complement each other to create Silicon Valley, then this effect has also created SVB, a special bank. ‘Banks’. So today, the entire Internet + VC narrative has gone, and the so-called Internet + Silicon Valley myth of wealth creation has also begun to go away.”

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