Did a "Handful" of Bad Actors Destroy Silicon Valley Bank?

That "white knight" didn't show up today to save Silicon Valley Bank, so it was shut down and handed over to the FDIC before even more damage to the company could be done. Now the startup world is flipping out, hoping that by the time the market reopens Monday morning, SVB will belong to a blue-chip bank so things don't continue to spiral out of control. Even prominent VCs who typically dismiss government intervention are asking for more help from Washington to stave off a larger meltdown, though turning hysterically to Twitter is probably the wrong way to go about it.

That some of these prominent VCs prompted yesterday's bank run surprises Bloomberg's Matt Levine not at all. He notes in his column today that SVB was mismanaged and overly exposed to interest rate risk, but also: "[I]f all of your depositors are startups with the same handful of venture capitalists on their boards, and all those venture capitalists are competing with each other to Add Value and Be Influencers and Do The Current Thing by calling all their portfolio companies to say “hey, did you hear, everyone’s taking money out of Silicon Valley Bank, you should too,” then all of your depositors will take their money out at the same time."

Feeling pressured to find the next Airbnb, Slack or Twilio? Cut the noise and surface highly-differentiated, reliable insights that can’t be found anywhere else. With the largest private market transcript library, Tegus helps you quickly figure out which deals you want to fast track – and for everything else, you can run your own calls with custom-sourced experts at a fraction of the cost – no markups, ever. Start using Tegus to map markets, source new companies, build conviction and win deals at speed. For a limited time, StrictlyVC readers can trial Tegus for free.

Yesterday at around noon in Los Angeles, investor Mark Suster of the venture firm Upfront Ventures began urging “calm” on Twitter. Silicon Valley Bank had bungled its messaging on Wednesday around an effort to strengthen its balance sheet, and startup founders were beginning to fear that their deposits at the tech-friendly, 40-year-old institution were at risk. “More in the VC community need to speak out publicly to quell the panic about @SVB_Financial,” wrote Suster, saying he believed in the bank’s health and arguing that the biggest risk to startups, the VCs to whom the bank has long catered, and to SVB itself would be “mass panic.”

As we know now, Suster was already too late. The industry was nervous, and the bank’s CEO Greg Becker, serenely addressing the bank’s customers in a Zoom call late yesterday morning, managed to scare them further when he uttered the words: “The last thing we need you to do is panic.”

By this morning, after trading of Silicon Valley Bank was halted to stop the shares’ free fall — they’d already plunged more than 80% between Wednesday and Thursday — the California Department of Financial Protection and Innovation closed the bank. Then it moved it under the control of the FDIC, which is figuring out next steps as the bank’s customers grapple with how to pay their bills in the interim.

Today, we asked Suster about his advice yesterday and whether or not he regrets it. During our talk, he also echoed a growing number of others in the startup world who’ve begun pointing the finger at what they insist was a small number of VCs who set off alarm bells across the startup ecosystem — bringing down SVB but also, potentially, triggering a contagion. Here’s that interview, edited lightly for length and clarity.

You were on CNBC this morning, where you said that you believe portfolio companies should have been diversifying where they hold their money all along. But my understanding is that Silicon Valley Bank required many startups to have an exclusive relationship with it.

SVB generally doesn’t require exclusivity unless you take out debt. The problem is that a lot of people take out debt, and we’ve been warning [portfolio companies] about this for a year.

What percentage of your startups do you think have diverse banking relationships?

About half have a relationship with SVB. Maybe half of those have alternative accounts.

You were very visibly supporting SVB yesterday as everyone else was racing for the exits. Is SVB an investor in your venture firm?

No.

Did Upfront get its money out of SVB?

More here.

Ring Therapeutics, a six-year-old startup based in Cambridge, Ma., that aims to use anelloviruses to potentially treat a broad range of diseases, raised an $86.5 million Series C round. Investors included Alexandria Venture Investments, Altitude Life Science Ventures, CJ Investment, Flagship Pioneering, Invus, Kyowa Kirin Co., T. Rowe Price, and UPMC Enterprises. The company has raised a total of $253.5 million. Boston Business Journal has more here.

MentorShow, a three-year-old Paris startup that offers celebrity-led self-improvement programming on topics such as sports, cooking, management, well-being, and leadership, raised a $16 million round co-led by Educapital and Crédit Mutuel Innovation, with previous investors Left Lane Capital and All Iron Ventures also chipping in. The company has raised a total of $21.3 million. Tech.eu has more here.

Aeqium, a three-year-old San Francisco startup that assists companies in making decisions about employee compensation, raised a $5.8 million seed round led by Vestigo Ventures and Ridge Ventures. HRTech Cube has more here.

BACH, a three-year-old Philadelphia startup whose app helps users plan bachelorette trips and group travel experiences, raised a $9 million round led by Pritzker Group Venture Capital, with Corazon Capital, Freestyle VC, and Oversubscribed Ventures piling on. The company has raised a total of $17 million. TechCrunch has more here.

Cubist, a San Diego startup that makes web3 tools for app developers, raised a $7 million seed round led by Polychain Capital, with participation from dao5, Amplify Partners, Polygon, Blizzard, and Axelar. More here.

Gyroscope, a three-year-old London startup that is launching a stablecoin that it claims is non-custodial and designed to be fully reserve backed, raised a $4.5 million seed round co-led by Placeholder VC and Galaxy Ventures, with Maven 11, Archetype, and Robot Ventures also contributing. The Block has more here.

OthersideAI, a two-year-old New York startup that has developed a generative AI writing tool called HyperWrite that helps users be more productive, raised a $2.8 million round co-led Cortical Ventures and Active Capital and including Madrona. More here.

RenewWest, a six-year-old Denver startup that helps land owners optimize environmental assets for carbon credits, raised a $3.2 million seed round co-led by Aspiration and One Small Planet, with Clear Sky Advisors also taking part. More here.

Wildxyz, a one-year-old San Francisco startup that operates an NFT marketplace for artists, raised a $7 million seed round round led by Matrix Partners and including LinkedIn founder Reid Hoffman and Goop founder Gwyneth Paltrow. CoinDesk has more here.

Got 2 minutes? Check out Affinity’s latest infographic—a quick checklist of 5 ways to make your email outreach to founders more efficient and effective.

Meta Platforms is reportedly planning to divest itself of Kustomer, a business-software company it bought last year in a deal that valued the company at $1 billion, as it looks to refocus on its core business. According to the WSJ, since the deal’s closing, the revenue of the customer-service platforms and chatbot company has flattened while it has burned through around $200 million between its operation and one-time expenses. More here.

USD Coin, the stablecoin issued by Circle Internet Financial, has fallen sharply below its intended 1-1 dollar peg to as low as 90 cents as investors react to its exposure to Silicon Valley Bank, where about $3.3 billion of a reported $40 billion in reserves that back the outfit's stablecoin are stuck at the moment.

“The best strategy at the moment is probably to do nothing," the director of research at FBB Capital Partners tells Bloomberg. "If you are "saving money for long-term goals, then this SVB news is just a minor hiccup."

Venture debt is about to get much more expensive.

TikTok effects are sparking beauty debates.

An ode to nicknames.

"Ice Merchants."

Frog loafers.

Nike shoebox by Tiffany & Co. (Its price? "Available upon request.")