Hot in Enterprise IT/VC - What's 🔥 in Enterprise IT/VC #332
Apologies for the delay on the newsletter as I, like many of you, have been scrambling to help founders figure out payroll. I’m still in shock 🤯 at the speed of this failure but also not surprised. The beauty of the echo chamber is that products like ChatGPT can be instant hits overnight, but at the same time, the mob can turn quickly and, in this case, create a bank run at the speed of which has never been seen before. I’m not here to opine on SVB management or if VCs caused this, but what I can say is that there are thousands of tech employees who are and will be severely impacted if deposits are not 100% honored. Let’s 🙏🏼 that the Fed does the right thing and steps up and guarantees deposits after all assets have been sold. If not, SVB, IMO, will lead to a massive ripple effect, a rapid flight to safety and quality, and potentially put other smaller, regional banks like First Republic, Signature…into similar paths of destruction. Best case scenario is a larger bank like a JPM Chase or Morgan Stanley takes over the SVB deposits and honors them fully on Monday morning similar to what happened to Washington Mutual during the mortgage crisis. For now, we don’t know the full effects on the startup ecosystem. Besides the obvious like meeting payroll, there are many venture investors whose bank accounts are on SVB and are in no position to make short term loans. Some Limited Partners who invest in VC funds also have assets locked up in SVB and can’t wire to VCs who are making capital calls. SVB was so important to the industry that 50% of all tech startups banked there along 44% of the companies that went public. This liquidity crunch will get much worse if we don’t get clarity on Monday. Hopefully there is either a sale or the uninsured receives the first of a few advanced dividends to alleviate the burden. As a founder/investor, once the ST payroll situation is solved, wait until Monday before signing any emergency additional bridge loans to cover future payrolls. Start those discussions now but wait until we all know more. I’ve seen pretty aggressive terms from some investors offering $0.50-60 on the dollar for future recovery of cash, and now is not the time to do so if you’re payroll this week is covered. BTW, here’s a great, simple document if you need to put together a short term more friendly loan. We just built a product @AngelList to help startups impacted by SVB that need emergency capital:
- Standardized Loan Agreement Docs (temporary loan from investors) with online signing & funding.
- Built in banking access (if your company needs it)
DM me if you need access As always, 🙏🏼 for reading and please share with your friends and colleagues. We will get through this but let’s be patient and kind to one another. Looking on the bright side, once we get through this, there will be a generation of founders and investors who once knew only 📈 but now will be seasoned veterans bringing healthy skepticism around building startups the right way with an obsession around the importance of cash. Scaling Startups
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