From charterworks: What small businesses should do now following Silicon Valley Bank's collapse
What happened?Silicon Valley Bank was rebalancing their portfolio and took some losses because of the decisions they made around investing the capital before interest rates shot up. This forced them to raise capital, and the communication made by the bank raised speculation about the health of the bank. A few VCs indicated to their companies that, while the risk of failure of SVB was low, they might want to take out their deposits.
Why is Silicon Valley Bank special? What does it mean to startups and how does it operate differently from a traditional bank?SVB was built to support the needs of our technology startup ecosystem. Their underwriting process for lending to companies takes into account the viability of its investor base and the fact that these companies are building in immature markets.
The collapse has rippled beyond the tech sector. My business relies on a payroll service that banks with Silicon Valley Bank; we don't bank with SVB, but some of our transactions were uncertain because our vendors or intermediaries do. Is this common? What’s the effect on Main Street?When one of the 20 largest banks fails, it’s hard to assess the impact.
An entrepreneur friend once told me he had more in common with the hot-dog vendor down the street than his former colleagues in big-technology companies. He was referring to the risk, the fortitude, the mental and mathematical gymnastics, yet also the simplicity of the north-star question: Is more money coming in than going out?
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