Ahead of today’s news, various funds, including Peter Thiel’s Founders Fund, which has invested in stablecoin issuer Paxos and former crypto trading firm Tagomi (now part of Coinbase Prime), have also reportedly advised their portfolio companies to pull money out of the startup-centric bank.
SVB’s crypto-centric VC clients Andreessen Horowitz and Sequoia Capital did not immediately respond to Decrypt’s request for comment. Paxos did not respond to comment either.
21Shares’ director of research Eliézer Ndinga told Decrypt “it may to some extent impact the crypto industry, most probably startups offering existing products and services in various sectors like Fintech while leveraging public blockchains or other elements of the crypto stack.”
The news comes days after crypto-friendly bank Silvergate Capital Corp shut shop.
SVB President and CEO Greg Becker reportedly told investors on Wednesday that the measures were taken to strengthen the bank’s finances to weather a recent drought of VC funding, as the institution expects “continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses.”
Becker maintained that the bank has sufficient liquidity, but a climate of mass panic is far from ideal, adding “if everyone is telling each other SVB is in trouble, that would be a challenge,” he said.
SVB did not immediately respond to Decrypt’s request for comment.
American hedge fund manager Bill Ackman took to Twitter, saying that SVB’s failure could “destroy an important long-term driver of the economy” due to the fact that many VC portfolio companies rely on the bank to store money and take out loans.
The billionaire investor argued that the authorities should step in to protect depositors to prevent possible contagion from spreading.
Ndinga of 21Shares said “that the SVB effect will impact the wider tech scene and VCs, assuming Silicon Valley Bank does not get bailed out by a banking incumbent. A bail-out is a best-case scenario to keep an eye as in fact, 44% of U.S. venture-backed technology and healthcare companies that IPO’ed last year have used SVB.”
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