SVB: VC's Freaking Out About Future VC Debt Financing

Not many have mentioned this yet, but a huge reason why the VC community is freaking out so much about SVB going under (despite deposits being 100% covered now) is because this was one of a handful of banks (and by far the largest at that) that lent these shitty, unprofitable companies money via Revolvers/Venture Debt - most banks would not do this kind of aggresive financing.

If Revolvers/Venture Debt do not stage a large comeback via an ultimate rescue of SVB (hearing VC firms are trying to save it still), they will need to solve for that financing hole.... that means more equity/capital from the VCs = more risk, lower returns.

(yes, I know that is not what ultimately put SVB under, but their exposure to unprofitable tech shitco's was part of the reason their deposit base exploded and subsequently started coming back to earth which was part of the reason they needed to try and raise equity, initiating the bank run)

Comments (3)

tommytobac, what's your opinion? Comment below:

there's non banks than do venture debt it's just going to be 2x the pricing since they dont make up for it on deposits and ancillary banking services. a lot of those companies dont even use their revolvers its just window dressing and those that need debt can access more appropriately priced private debt markets.

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