The collapse of Silicon Valley Bank was a “Lehman moment” for the tech industry, according to a summit Goldman Sachs deal maker.
Cliff Marriott, co-head of technology, media and telecoms in Europe for Goldman Sachs’ investment banking division, said SVB’s March 10 shutdown was “quite stressful” as the lender’s clientele scrambled to figure out how to would earn the payroll.
“That first weekend was kind of like the Lehman moment for technology and it was really more operational for those companies,” Marriott told CNBC’s Arjun Kharpal.
“They needed access to capital. A lot of their assets were on SVB. And secondly, SVB paid a lot of their payroll payments to pay their employees.”
Founded in 1983, SVB was considered a reliable source of funding for tech startups and venture capital firms. The California-based commercial lender, a subsidiary of SVB Financial Group, was at one point the 16th-largest bank in the US and the largest in Silicon Valley by deposits.
SVB was acquired by the US government after its clientele of venture capitalists and tech startups took billions out of their accounts. Many VCs had advised portfolio companies to raise money for fear that the lender would crumble.
The assets of the SVB Financial Group – assets such as US Treasuries and government-backed mortgages that were considered safe – were hit by the Fed’s aggressive rate hikes and their value fell dramatically.
Earlier this month, the company revealed it had sold $21 billion worth of securities at a loss of about $1.8 billion and said it needed to raise $2.25 billion to meet clients’ borrowing needs and make new loans. finance.
The future of SVB remains uncertain, even though deposits were eventually suspended by the government and SVB’s government-appointed CEO tried to reassure customers that the bank remained open for business.
Marriott said there is “still a big question mark about which bank or firm or group of firms is going to replace SVB in terms of providing those utility-like services for technology, giving them bank accounts, allowing them to make payrolls, cash balances.”
The collapse of the SVB has also raised questions about the potential impact on other banks, with the SVB being far from the only lender that has come under pressure. Swiss investment banker Credit Suisse was bailed out last week by its main rival UBS in a government-backed price cut deal.
Marriott also talked about tech IPOs and their outlook for 2023. The European tech IPO market has largely closed due to a confluence of market pressures, including higher interest rates, which make the future cash flows of high-growth tech companies less attractive.
Marriott said he would have been more optimistic about a recovery in technology IPO activity two weeks ago.
“I’m still hopeful that we’ll see tech IPO activity in 2023. And if we don’t, I think 2024 will be a big year for tech IPOs,” Marriott said.
“I think what we’re going to see is the more established profitable companies come first, so the easier to understand business models, profitable companies, before we see the really highly valued profit or negative profit companies that we saw in 2021.”
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