PitchBook News - SVB borrowers face a quandary

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The Daily Pitch: VC

March 14, 2023

The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data

In today's Daily Pitch, you'll find:

Startups that took out venture loans from SVB face risks if they stay—but also if they go.

Our analysts break down the impact of SVB's failure and what the future of VC could look like without Silicon Valley Bank.

Partners to neobanks like Revolut and Brex are caught in the regional bank sell-off.

Today's Top Stories

SVB borrowers face a quandary: Wait and see, or start afresh?

(nuntarat eksawetanant/Shutterstock)

The future of Silicon Valley Bank's outstanding venture loans is unclear.

Startups that borrowed capital from the now-defunct bank do not have access to their undrawn credit, and it is making some businesses nervous.

A number of companies have already started the process of refinancing the loan with another lender, while others are waiting to see if the ultimate buyer of the SVB's enormous venture debt portfolio will keep the loans intact. Ramifications abound.

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Venture capital without Silicon Valley Bank

The collapse of Silicon Valley Bank couldn't have come at a worse time for startups.

Venture-backed companies were already facing a capital crunch after market volatility forced investors to slow dealmaking and set higher benchmarks for financing—and now startups' debt financing options have also taken a hit.

Other banks and lenders are stepping in, but no matter how quickly they may be able to stem the fallout, SVB's collapse is sure to irrevocably change the inner workings of the venture capital industry.

Our latest analyst note breaks down how we got to this point, the immediate impact of SVB's failure, the broader implications for venture lending and what a future venture capital market could look like without Silicon Valley Bank.

read it now

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Credit markets roiled in SVB aftermath

(Andrii Yalanskyi / Shutterstock)

Investors are selling off credit assets across the quality spectrum, from leveraged loans to high-grade bonds, our colleagues at LCD are reporting.

The secondary loan market just had its worst day of the year. The Morningstar LSTA US Leveraged Loan Index fell 0.76% on Monday, adding to a 0.17% decline Friday.

Corporate bonds are also suffering, with bank-sector spreads posting their sharpest rise on Friday since the onset of the pandemic in March 2020. Banks account for nearly a quarter of the investment-grade bond market.

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Revolut, Brex partners caught in regional bank sell-off

Shares of Metropolitan Commercial Bank, the banking partner to Revolut's US arm, fell around 44% Monday.
(Tada Images/Shutterstock)

Digital-only banks like Chime and Dave, referred to as neobanks, got widespread attention during the pandemic for their branchless services and ease of use. With the SVB crisis, their future is looking a little murky. These fintech companies partner with traditional banks—and those banks have seen their stocks plummet in the last few days.

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Meet the 5 industry leaders tasked with carving up SVB

(Peshkova/Shutterstock)

A group of five leaders with experience across banking, venture capital, regulation and technology is tasked with cleaning up what's left of Silicon Valley Bank in the wake of its blowup.

The bank's parent, SVB Financial Group, said the special committee overseeing its restructuring will weigh "strategic alternatives" for its SVB Capital and SVB Securities arms. Here's what you need to know about each person on the committee.

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'The relief is palpable': HSBC buys SVB UK for £1

(Anadolu Agency/Getty Images)

HSBC has saved UK startups and investors from likely massive losses by acquiring the UK operation of the failed Silicon Valley Bank for £1 (about $1.22), protecting customer deposits without using taxpayers' money.

This deal, arranged by the Bank of England and the UK Treasury, has been welcomed by investors.

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Recommended Reads

How the Federal Reserve's rescue package for US banks differs from 2008 bailouts. [Financial Times]

Logistics companies are laying off employees as ecommerce growth stalls. [The Wall Street Journal]

What Silicon Valley Bank's collapse could mean for California's tech-fueled economy. [Bloomberg]

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VC Deals

Viridos, which develops biofuel from algae, has raised a $25 million Series A led by Breakthrough Energy Ventures, with participation from United Airlines Ventures and Chevron.

Shennon Bio, a San Francisco-based immunotherapy specialist, has raised a $13 million seed round led by DCVC, with participation from Foundation Capital and AV8.

Sunhero, a Barcelona-based solar energy company, has secured €10 million in a round led by Planet A.

Aequim, a fintech specialist, has raised a seed round from Vestigo Ventures and Ridge Ventures.

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PE Deals

SAP has agreed to sell Qualtrics to Silver Lake and the Canada Pension Plan Investment Board for roughly $12.5 billion. The financing will include equity from Silver Lake and other co-investors, $1.75 billion in equity from CPPIB, and $1 billion in debt.

Pritzker Private Capital-backed Aurorium, formerly Vertellus, has acquired specialty materials manufacturer Centauri Technologies.

PSG has invested more than $80 million in MentorcliQ, an employee mentorship software company. Rev1 Ventures and Plymouth Growth also participated in the new funding.

INVL-backed Lithuanian medical rehabilitation center Eglės Sanatorija has acquired Lithuania-based rehab services provider Reabilita.lt.

BGF has invested £6 million in London-based natural pet food brand Scrumbles.

Exit & IPOs

Inflexion has sold UK-based software development company Mobica to US-listed Cognizant for £250 million.

IK Partners has agreed to acquire infrastructure services provider Ipsum from Aliter Capital. The company provides services to UK power and water markets.

Investors

The Teacher Retirement System of Texas has divested nearly $470 million from BlackRock's Tactical Opportunities Fund and $51 million from BlackRock in order to comply with a state law that bars public investment in funds that "boycott" fossil fuel companies, The Dallas Morning News reported.

Corporate M&A

Pharmaceutical company Pfizer has agreed to buy Seattle-based Seagen, a Nasdaq-listed biotech company that develops cancer therapies, for $43 billion.

Chart of the Day

Source: PitchBook's 2022 Global Fund Performance Report

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PitchBook News - SVB borrowers face a quandary

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