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Tag: silicon valley

  • What is SVB like under Raleigh’s First Citizens Bank? We asked NC Triangle startups.

    What is SVB like under Raleigh’s First Citizens Bank? We asked NC Triangle startups.

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    First Citizens Bank headquarters in Raleigh, N.C. on Monday, March 27, 2023.

    First Citizens Bank headquarters in Raleigh, N.C. on Monday, March 27, 2023.


    Kaitlin McKeown

    kmckeown@newsobserver.com

    On March 27, Raleigh’s First Citizens Bank transformed its present and future by purchasing the remains of the failed Silicon Valley Bank. Overnight, it went from the 30th largest U.S. bank to the 16th, adding $56 billion in deposits and nearly doubling its loans.

    The move surprised many in the finance world. Silicon Valley Bank was the go-to bank for early-stage tech startups before a bank run sparked its collapse on March 10.

    “When you started one of these companies, you didn’t give another bank a second thought,” said Igor Jablokov, founder of the Raleigh AI management firm Pryon. “You just started working with SVB.”

    In reputation and portfolio, First Citizens was the opposite. It was a family-run bank founded more than 120 years ago in Johnston County. While First Citizens would eventually move north to the burgeoning technology hub of Raleigh, it never focused on the type of venture banking done by the Bay Area-based SVB.

    However, it did have a track record of buying distressed financial institutions. In that way, the acquisition made sense.

    “I was excited because they’re a local bank,” said Jud Bowman, a serial entrepreneur in Durham who had an SVB account and loan for his startup Sift Media.

    So, seven months later, how is Silicon Valley doing under First Citizens?

    Answers arrived last week when First Citizens released its latest earnings.

    In the five days following the sale, deposits in the SVB segment of First Citizens Bank fell $7 billion as clients moved money to larger banks that were perceived to be safer. By the end of April, deposits had fallen a total of $15.5 billion since First Citizens took over.

    Since May 1, however, the deposit exodus has largely ceased. The SVB division of First Citizens finished September with roughly the same deposit level it had six months prior — $40 billion.

    “From the data, it seems at least they’re not hemorrhaging (deposits),” said Qi Chen, an accounting professor at the Duke Fuqua School of Business.

    ‘They understand they have to convince us’

    First Citizens has put resources into reassuring startup founders that SVB is still a reliable banking option. It launched a nationwide “Yes, SVB” campaign and, despite laying off around 500 former SVB employees in May, First Citizens has retained several former SVB staffers in local markets.

    The SVB managing director in the Carolinas remains Chris Stoecker, who is based in Raleigh. Stoecker has been with SVB since 2010 and previously worked at Square 1 Bank in Durham.

    “I talk to Chris every few weeks,” Bowman said. “For SVB to survive and thrive under (First Citizens), they’ve got to hold on to that talent base.”

    Like founders nationwide, Bowman felt the chaos of SVB’s demise this spring. Silicon Valley was itself the 16th largest bank in the country, with a reputation for helping technology startups stretch their venture funding. But as interest rates rose, some grew anxious about the company’s significant holdings of long-term bonds. This ignited a bank run, which prompted the federal government to assume control.

    Bowman was unable to extricate Sift Media’s money before the Federal Deposit Insurance Corp. froze SVB accounts.

    “Is this the end of the company?” he recalled thinking.

    A security guard looks out a door as customers line up at Silicon Valley Bank headquarters in Santa Clara, California, on March 13, 2023.
    A security guard looks out a door as customers line up at Silicon Valley Bank headquarters in Santa Clara, California, on March 13, 2023. Noah Berger/AFP TNS

    Under its business loan agreement, Sift Media was obligated to keep an account with SVB, he said. But Bowman is confident in SVB’s future regardless of this requirement.

    “They understand they have to convince us,” he said. “I think they’re back.”

    Bowman was further reassured a few weeks ago when he attended a dinner with First Citizens Bank President Peter Bristow, who married into the Holding family, which has led First Citizens since 1935. Bowman said he left the dinner feeling First Citizens would make a strong commitment to startups.

    While Sift Media only banks with SVB, others in the Triangle who had exclusively banked with SVB now diversify their deposits.

    “As a firm, we follow the same policies we suggested with our companies,” said Jason Caplain, general partner and cofounder of Bull City Venture Partners in Durham. “So we have a cash balance at SVB that’s now smaller in size and the rest we pushed off to another bank.”

    Jablokov said SVB under First Citizens has been more “liberal” in permitting his startup, which has an SVB loan, to store some of its deposits at other banks as well.

    “‘There’s no way any sort of (chief financial officer) in these startups is going to allow you to not have a backup (account),” he said. “So, we do have relationships with other banking providers now.”

    Like Bowman, Caplain and Jablokov described the transition of SVB to First Citizens as seamless.

    “For us, there’s been no change,” Caplain said. “Still the same account. Still the same software. Still the same people.”

    Others stick with the bigger banks

    Today, First Citizens is the 15th largest bank in the country with more than $200 billion in assets. Yet some Triangle entrepreneurs say they still prefer to keep funds with the handful of national banks more universally deemed to be “too big to fail.”

    For example, the largest U.S. commercial bank, JPMorgan, has $3.4 trillion in assets. Charlotte-based Bank of America is second with $2.45 trillion.

    “Since First Citizens purchased SVB, uncertainty has been largely diminished,” said Ben Scruggs, CEO of Altis Biosystems in Research Triangle Park. Still, he has decided to keep Altis’ primary accounts with bigger banks that he finds “understand small companies.”

    Compared to deposits, SVB loan levels have more consistently declined since the acquisition.

    A First Citizens Bank branch in downtown Raleigh.
    A First Citizens Bank branch in downtown Raleigh. Brian Gordon bgordon@newsobserver.com

    The bank added $68 billion in loans with the sale but had around $57 billion as of Sept. 30, a 17% drop. This decrease slowed over the summer, and in its Oct. 26 earnings presentation, First Citizens said that about half of its recent loan slide was due to winding down SVB’s global banking unit.

    Speaking to investors, First Citizens Bank CEO Frank Holding acknowledged that the current “private market investment landscape” continues to suppress fundraising activity, exits and deals.

    Higher interest rates have caused the entire sector to be more cautious, said Chen of Duke University.

    “The (loan) industry itself is in a quiet period,” he said. “Nobody wants loans, nobody’s getting loans. So, it’s not clear going forward whether those innovative small business startups, when they need money, will still come to SVB.”

    First Citizens flourishes on Wall Street

    First Citizens bought SVB’s deposits and loans in exchange for company stock worth up to $500 million. It’s a decision that appears to be paying off.

    Since the acquisition, the share price of First Citizens has soared. On the year, the bank’s stock is up 79%. In contrast, the Dow Jones U.S. Banks Index is down 16%.

    First Citizens beat analysts’ expectations last week, as the company ended September with around $146 billion in deposits. For comparison, the company had less than $88 billion in deposits the same time last year.

    Holding told investors the SVB purchase has given his bank access to new U.S. markets it was “already targeting.” Legacy SVB has a strong presence in Northern California, while First Citizens’ California branches were clustered in the southern part of the state.

    First Citizens seems to be hiring, too, at least locally. According to data provided to The News & Observer by the North Carolina Technology Association, First Citizens was the Triangle’s top hirer for tech jobs in September.

    “First Citizens has experienced significant growth over the past couple of years,” company spokesperson Frank Smith said in an email. “As a result, we continue to assess our tech talent requirements and positions to ensure we are meeting the needs of our growing enterprise.”

    Open Source

    Do you enjoy Triangle tech news? Subscribe to Open Source, The News & Observer’s weekly technology newsletter and look for it in your inbox every Friday morning. Sign up here.

    This story was originally published November 2, 2023, 7:00 AM.

    Related stories from Charlotte Observer

    Brian Gordon is the Technology & Innovation reporter for The News & Observer and The Herald-Sun. He writes about jobs, start-ups and all the big tech things transforming the Triangle. Brian previously worked as a senior statewide reporter for the USA Today Network and covered education for the Asheville Citizen-Times.

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  • Artificial Intelligence May Be Humanity’s Most Ingenious Invention—And Its Last?

    Artificial Intelligence May Be Humanity’s Most Ingenious Invention—And Its Last?

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    We invented wheels and compasses and chocolate chip cookie dough ice cream and the eames lounge chair and penicillin and e = mc2 and beer that comes in six-packs and guns and dildos and the Pet Rock and Doggles (eyewear for dogs) and square watermelons. “One small step for man.” We came up with the Lindy Hop and musical toothbrushes and mustard gas and glow-in-the-dark Band-Aids and paper and the microscope and bacon—fucking bacon!—and Christmas. “Ma-ma-se, ma-ma-sa, ma-ma-ko-ssa.” We went to the bottom of the ocean and into orbit. We sucked energy from the sun and fertilizer from the air. “Let there be light.” We created the most amazing pink flamingo lawn ornaments that come in packs of two and only cost $9.99!

    In a universe that stretches an estimated 93 billion light-years in diameter with 700 quintillion (7 followed by 20 zeros) planets—here, on this tiny little blue dot we call Earth, one of us created a tool called a spork. The most astounding part is that while that same universe is an estimated 26.7 billion years old, we did everything in just under 6,000 years.

    All of this in less than 200 generations of human life.

    Now we’ve just created a new machine that is made of billions of microscopic transistors and aluminum and copper wires that zigzag and twist and turn and are interconnected in incomprehensible ways. A machine that is only a few centimeters in width and length.

    A little tiny machine that may end up being the last invention humans ever create.

    This all stems from an idea conceptualized in the 1940s and finally figured out a few years ago. That could solve all of the world’s problems or destroy every single human on the planet in the snap of a finger—or both. Machines that will potentially answer all of our unanswerable questions: Are we alone in the universe? What is consciousness? Why are we here? Thinking machines that could cure cancer and allow us to live until we’re 150 years old. Maybe even 200. Machines that, some estimate, could take over up to 30 percent of all jobs within the next decade, from stock traders to truck drivers to accountants and telemarketers, lawyers, bookkeepers, and all things creative: actors, writers, musicians, painters. Something that will go to war for us—and likely against us.

    Artificial intelligence.

    Thinking machines that are being built in a 50-square-mile speck of dirt we call Silicon Valley by a few hundred men (and a handful of women) who write in a language only they and computers can speak. And whether we understand what it is they are doing or not, we are largely left to the whims of their creation. We don’t have a say in the ethics behind their invention. We don’t have a say over whether it should even exist in the first place. “We’re creating God,” one AI engineer working on large language models (LLMs) recently told me. “We’re creating conscious machines.”

    Already, we’ve seen creative AIs that can paint and draw in any style imaginable in mere seconds. LLMs can write stories in the style of Ernest Hemingway or Bugs Bunny or the King James Bible while you’re drunk with peanut butter stuck in your mouth. Platforms that can construct haikus or help finish a novel or write a screenplay. We’ve got customizable porn, where you can pick a woman’s breast size or sexual position in any setting—including with you. There’s voice AI software that can take just a few seconds of anyone’s voice and completely re-create an almost indistinguishable replica of them saying something new. There’s AI that can re-create music by your favorite musician. Don’t believe me? Go and listen to “Not” Johnny Cash singing “Barbie Girl,” Freddie Mercury intoning “Thriller,” or Frank Sinatra bellowing “Livin’ on a Prayer” to see just how terrifying all of this is.

    Then there’s the new drug discovery. People using AI therapists instead of humans. Others are uploading voicemails from loved ones who have died so they can continue to interact with them by talking to an AI replica of a dead parent or child. There are AI dating apps (yes, you date an AI partner). It’s being used for misinformation in politics already, creating deepfake videos and fake audio recordings. The US military is exploring using AI in warfare—and could eventually create autonomous killer robots. (Nothing to worry about here!) People are discussing using AI to create entirely new species of animals (yes, that’s real) or viruses (also real). Or exploring human characteristics, such as creating a breed of super soldiers who are stronger and have less empathy, all through AI-based genetic engineering.

    And we’ve adopted all of these technologies with staggering speed—most of which have been realized in just under six months.

    “It excites me and worries me in equal proportions. The upsides for this are enormous, maybe these systems find cures for diseases, and solutions to problems like poverty and climate change, and those are enormous upsides,” said David Chalmers, a professor of philosophy and neural science at NYU. “The downsides are humans that are displaced from leading the way, or in the worst case, extinguished entirely, [which] is terrifying.” As one highly researched economist report circulated last month noted, “There is a more than 50-50 chance AI will wipe out all of humanity by the middle of the century.” Max Tegmark, a physicist at the Massachusetts Institute of Technology, predicts a 50 percent chance of demise within the next 100 years. Others don’t put our chances so low. In July, a group of researchers, including experts in nuclear war, bioweapons, AI, and extinction, and a group of “superforecasters”—general-purpose prognosticators—did their own math. The “experts” deduced that there was a 20 percent chance of a catastrophe by 2100 and a 6 percent chance of an extinction-like event from AI, while the superforecasters had a more positive augury of a 9 percent chance of catastrophe and only 1 percent chance we’d be wiped off the planet.

    It feels a little like picking the extinction lottery numbers—and even with a 1 percent chance, perhaps we should be asking ourselves if this new invention is worth the risk. Yet the question circulating around Silicon Valley isn’t if such a scenario is worth it, even with a 1 percent chance of annihilation, but rather, if it is really such a bad thing if we build a machine that changes human life as we know it.

    Larry Page is not an intimidating-looking man. When he speaks, his voice is so soft and raspy from a vocal cord injury, it sounds like a campfire that is trying to tell you something. The last time I shook his hand, many, many years ago, it felt as soft as a bar of soap. While his industry peers, like Mark Zuckerberg and Elon Musk, are often performing public somersaults with pom-poms for attention, Page, who cofounded Google and is on the board of Alphabet, hasn’t done a single public interview since 2015, when he was onstage at a conference. In 2018, when Page was called before the Senate Intelligence Committee to address Russian election meddling, online privacy, and political bias on tech platforms, his chair sat empty as senators grilled his counterparts.

    While Page stays out of the limelight, he still enjoys attending dinners and waxing poetic about technology and philosophy. A few years ago a friend found himself seated next to Page at one such dinner, and he relayed a story to me: Page was talking about the progression of technology and how it was inevitable that humans would eventually create “superintelligent machines,” also known as artificial general intelligence (AGI), which are computers that are smarter than humans, and in Page’s view, once that happened, those machines would quickly find no use for us humans, and they would simply get rid of us.

    “What do you mean, get rid of us?” my friend asked Page.

    Like a sci-fi writer delivering a pitch for their new apocalyptic story idea, Page explained that these robots would become far superior to us very quickly, and if we were no longer needed on earth and that’s the natural order of things—and I quote—“it’s just the next step in evolution.” At first my friend assumed Page was joking. “I’m serious,” said Page. When my friend argued that this was a really fucked up way of thinking about the world, Page grew annoyed and accused him of being “specist.”

    Over the years, I’ve heard a few other people relay stories like this about Page. While being interviewed on Fox News earlier this year, Musk was one of them. He explained that he used to be close with Page but they no longer talked after a debate in which Page called Musk “specist” too. “My perception was that Larry was not taking AI safety seriously enough,” Musk said. “He really seems to want digital superintelligence, basically digital God, if you will, as soon as possible.”

    Let’s just stop for a moment and unpack this. Larry Page…the founder of one of the world’s biggest companies…a company that employs thousands of engineers that are building artificial intelligence machines right now, as you read this…believes that AI will, and should, become so smart and so powerful and so formidable and…and…that one day it won’t need us dumb pathetic little humans anymore…and it will, and it should, GET RID OF US!

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    Nick Bilton

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  • Silicon Valley Billionaires Are Building a City In Northern California | Entrepreneur

    Silicon Valley Billionaires Are Building a City In Northern California | Entrepreneur

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    For years, the identities of investors in large land purchases in Solano County, California have been shrouded in secrecy.

    Some government officials and residents believed the investment company, known as Flannery Associates, might even be a foreign entity planning nefarious activities or an amusement park, and asked the government to investigate.

    But the mystery was solved over the weekend when Flannery revealed that it was, in fact, backed by a number of high-profile Silicon Valley executives, including LinkedIn co-founder Reid Hoffman; former Sequoia Capital partner Michael Moritz; and venture capitalists Marc Andreessen and Chris Dixon, and Lauren Powell Jobs, daughter or Steve Jobs, according to a report in the Wall Street Journal.

    Their grand plan is to turn the mostly agricultural area into an affordable and sustainable new city, according to Flannery representative Brian Brokaw.

    “We are proud to partner on a project that aims to deliver good-paying jobs, affordable housing, clean energy, sustainable infrastructure, open space, and a healthy environment to residents of Solano County,” Brokaw said in a statement. “We are excited to start working with residents and elected officials, as well as with Travis Air Force Base, on making that happen.”

    Related: This Solar-Powered Florida Town Was Built to Withstand Hurricanes. Did It Work?

    Building a new city from scratch

    According to a report in The New York Times, Flannery has spent nearly $800 million over the past five years on land in Solano, which is 60 miles northeast of San Francisco and home to the Travis Air Force Base.

    They have methodically purchased large pieces of property from landowners, sometimes way above market value.

    The project is being quietly led by Jan Sramek, a former Goldman Sachs trader with deep connections in the tech world. His vision is to take the arid rural land and transform it into a bustling urban community with tens of thousands of homes with clean energy.

    Some pushback from the community

    Not everyone has been excited by Flannery’s activity in the area. The Air Force had been investigating the company for months, and state representatives had also called for the National Committee on Foreign Investment in the U.S. to investigate. A meeting has been called for next week.

    Meanwhile, there have been some contentious legal dealings in the area. In May, Flannery sued landowners in the area, accusing them of colluding to drive up real-estate prices. The case has left a sour taste in many’s mouths.

    “Flannery Associates has developed a very bad reputation in Solano County through their total secrecy and mistreatment of generational family farmers,” state representative John Garamendi Garamendi said in a statement.

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    Jonathan Small

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  • How Musk, Thiel, Zuckerberg, and Andreessen—Four Billionaire Techno-Oligarchs—Are Creating an Alternate, Autocratic Reality

    How Musk, Thiel, Zuckerberg, and Andreessen—Four Billionaire Techno-Oligarchs—Are Creating an Alternate, Autocratic Reality

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    Taplin, the educator, writer (Move Fast and Break Things), and film producer (Mean Streets, The Last Waltz), is director emeritus of USC’s Annenberg Innovation Lab. His peripatetic career includes stints as tour manager for Bob Dylan and the Band, VP of media M&A at Merrill Lynch, professor at USC, and founder of the pioneering video-on-demand company Intertainer.

    Four very powerful billionaires—Peter Thiel, Elon Musk, Mark Zuckerberg, and Marc Andreessen—are creating a world where “nothing is true and all is spectacle.” If we are to inquire how we got to a place of radical income inequality, post-truth reality, and the looming potential for a second American Civil War, we need look no further than these four—“the biggest wallets,” to paraphrase historian Timothy Snyder, “paying for the most blinding lights.”

    I call them the Technocrats, in recognition of the influence of the technocracy movement, founded in the 1930s by Elon Musk’s grandfather, Joshua Haldeman. The Technocrats make up a kind of interlocking directorate of Silicon Valley, each investing in or sitting on the boards of the others’ companies. Their vast digital domain controls your personal information; affects how billions of people live, work, and love; and sows online chaos, inciting mob violence and sparking runs on stocks. These four men have long been regarded as technologically progressive heroes, but they are actually part of a broader antidemocratic, authoritarian turn within the tech world, deeply invested in preserving the status quo and in keeping their market-leadership positions or near-monopolies—and their multi-billion-dollar fortunes secure from higher taxes. (“Competition is for suckers,” Thiel once posited.)

    Indeed, they are American oligarchs, controlling online access for billions of users on Facebook, Twitter, Threads, Instagram, and WhatsApp, including 80 percent of the US population. Moreover, from the outside, they appear to be more interested in replacing our current reality—and our economic system, imperfect as it is—with something far more opaque, concentrated, and unaccountable, which, if it comes to pass, they will control.

    I use the term techno-determinism to describe the path the Technocrats have dictated for our country because they have sold, and we have bought into, the idea that they are going to deliver us a bright future. The future they are now selling us, however—crypto fortunes, the merger of the human and the computer via AI, the prospect of spending our lives in the Metaverse or on Mars—is a lie. To quote Snyder once more, Donald Trump has shown that he “was lying not so much to deny the truth as to invite people into an alternative reality.” Such sleight-of-hand applies here as well. The alternative reality that these men are focused on is a world of technodeterminism, one in which AI may eventually do all the real work and a large number of humans may be rendered useless to society.

    The Technocrats do not hide the fact that they plan to feed at the government trough to finance some of their more outrageous schemes. Their plan for your future involves nothing less than confronting the nihilism of a looming dystopia. And four of the projects they are pursuing to address their visions will need tens of trillions of dollars of (mostly public) investment capital over the next two decades. The first project, supported by Andreessen, Thiel, and Zuckerberg, is Web3, a virtual world (the Metaverse) accessed by virtual reality (VR) headgear, which, despite all of the clear benefits that it promises, many end up converting the free web into an online theme park in which every door requires a crypto token to open. The second project is the support of crypto currency. As Adam Fischer, Israel’s top-ranked venture capitalist, has pointed out, “Crypto is not so much an investment idea that aligns with the libertarian political ideology, as it is a virulent strain of libertarian political ideology leveraging human greed through the blockchain.” The third project involves supporting Elon Musk’s $10 trillion pipe dream of sending humans to live on Mars.

    But of all the myths the Technocrats peddle, none is more far-fetched than transhumanism, a concept dear to the heart of Peter Thiel. And to understand what could well be the Biggest Lie of Big Tech requires a deep dive into this social movement, which is focused on R&D for “human-enhancement technologies” that might someday allow people to live to the age of 160 or more. Needless to say, access to these age-extension systems, which have not yet been invented, will be incredibly expensive, so, under this scheme, the only ones destined to survive well into their second century will likely be the multimillionaires.

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    Jonathan Taplin

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  • Prince Harry’s Role at BetterUp Critiqued As the Company Falters

    Prince Harry’s Role at BetterUp Critiqued As the Company Falters

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    In 2020, Prince Harry and Meghan Markle moved to California and made their initial forays into the tech and media sector against the backdrop of the pandemic, announcing a big deal with Netflix in September and an exclusive podcasting partnership with Spotify in December. By the following April, they made another serious commitment to a tech company when Harry announced his role as chief impact officer at the online mental health and career coaching start-up BetterUp. 

    At the time, CEO Alexi Robichaux said Harry was taking on a “meaningful and meaty role” at the company that matches customers with career coaches. Ever since, Harry has participated in plenty of public-facing events for BetterUp, including a December 2021 interview where he made headlines for noting that “job resignations” are a sign that many people are “putting their mental health and happiness first.” 

    But on Saturday, the Daily Beast reported that according to some staffers, Harry’s duties with the company were nebulous, and one former employee told the outlet that the prince’s day-to-day responsibilities included “zero things.” The report came amid tumultuous times for the company, which recently laid off approximately 16% of its workforce after, according to two of the outlet’s sources, the company failed to meet last year’s revenue projections. Moreover, the company faced a “revolt” by the coaches who are contractors after modifying their pay. (BetterUp did not immediately respond to a request for comment.)

    Some staffers added that Harry’s star power did help close a few deals and increase the company’s reach in Europe, but another said that his presence in the tabloids might have been more trouble than it was worth. “Every article mentions his role at BetterUp, then goes on to roast [him and Meghan Markle],” a recent employee told the outlet. “The juice isn’t worth the squeeze.”

    Though the Daily Beast pointed out that the company was most recently valued at $4.7 billion, the trouble at BetterUp, which still lists Harry as chief impact officer on its website, is another sign that Meghan and Harry’s professional challenges have stemmed at least partly from a widespread market correction in the tech industry. The couple’s initial move to the US coincided with the advent of stay-at-home orders that left people around the world newly dependent on technology for both work and leisure. Major tech companies saw their valuations skyrocket, web-based start-ups were making big expansions, and media companies were upping their spending on content, with companies like Facebook making bets on a permanent reorientation toward digital living.

    Ultimately, that financial energy seemed to be illusory, and the last few years have seen major layoffs across the tech sector. The readjustment has led to changes in strategy at the companies Meghan and Harry have worked with. In May 2022, Netflix canceled one Archewell Productions series after a disappointing earnings report led to the company’s stock plummeting. In June 2023, Spotify canceled Meghan’s podcast Archetypes, just ten days after it announced that it was retooling its entire podcast strategy.

    Last week, one Hollywood insider told People that “the royal element and, in some ways, the drama around them inflated the price, deals and expectations.” Now, amid a larger economic reckoning for the tech sector, Harry and Meghan might have another opportunity to prove what they are worth.

    Listen to Vanity Fair’s DYNASTY podcast now.

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    Erin Vanderhoof

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  • Another top Silicon Valley investor is splitting off its China business as pressure mounts | CNN Business

    Another top Silicon Valley investor is splitting off its China business as pressure mounts | CNN Business

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    Editor’s Note: Sign up for CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world.


    Hong Kong
    CNN
     — 

    GGV Capital, a prominent Silicon Valley venture capital firm, has become the latest big investor to break up its US and China operations into separate companies as tensions between the two countries over tech and geopolitics continue to rise.

    The firm announced Thursday that it would divide its business into two “completely independent” firms with separate new brands, which have not been revealed.

    According to the company, one side will concentrate on North America, Latin America, Europe, Israel and cross-border US-India deals, led by teams in California and New York by managing partners Glenn Solomon, Hans Tung, Jeff Richards and Oren Yunger.

    The other side will focus on China, Southeast Asia and South Asia, run from its headquarters in Singapore, by managing partners Jenny Lee and Jixun Foo.

    GGV’s existing Chinese yuan-denominated funds “will continue to be managed independently” under its Chinese brand, Jiyuan Capital, it said.

    In a statement, the firm attributed the decision to the fact that “over the last decade, the investment landscape has shifted significantly, and the operating environment has become highly complex.”

    “Against these new realities, GGV is also evolving,” it added, without elaborating further.

    The transition is expected to be completed by the end of the first quarter of next year.

    GGV Capital has approximately $9.2 billion in assets under management. The firm is known for backing tech companies around the world, such as Alibaba (BABA), Airbnb (ABNB), Slack, TikTok owner ByteDance and Chinese ride-hailing provider Didi.

    The move comes as US-China tensions continue to affect how businesses operate across the world’s top two economies.

    Last month, the Biden administration announced it would restrict investments by US venture capital and private equity firms, as well as joint ventures, in Chinese artificial intelligence, quantum computing and semiconductors.

    The executive order will exacerbate a slump in deals between the United States and China, and deliver a “major blow” to Chinese startups, analysts and investors previously told CNN.

    Asked whether the US order or wider geopolitical tensions had factored into its decision, GGV Capital declined to comment.

    The firm has recently come under greater scrutiny from US lawmakers.

    In July, a US House committee said it had sent letters to four investment firms, including GGV, “expressing serious concern and demanding information about the firms’ investments” in artificial intelligence, chips and quantum computing companies in China.

    One investment named was a GGV deal with Megvii, an AI developer. The company is best known for its facial recognition software, and has long been accused of human rights violations against Uyghurs and other members of Muslim minority groups in China’s Xinjiang region.

    Megvii was added to a US trade blacklist in 2019 over the issue and previously told CNN that there were “no grounds” for that decision.

    The ongoing pressure has already led other firms to separate their US and Chinese businesses this year.

    In June, top global venture capital firm Sequoia announced a similar decision to cordon off its operations into three entities that cover Europe and the United States; China; and India and Southeast Asia. Its China business will be run independently under its Chinese name, Hongshan.

    Leaders of the Silicon Valley firm said at the time that it had “become increasingly complex to run a decentralized global investment business.”

    In August, Dentons, a leading law firm, also said its China unit would become a standalone legal entity, in response to new Chinese regulations related to data privacy, cybersecurity and capital control.

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  • Facebook Whistleblower Frances Haugen Regrets Nothing

    Facebook Whistleblower Frances Haugen Regrets Nothing

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    “I haven’t called my mom enough, that’s definitely true,” former Facebook product manager turned whistleblower Frances Haugen told me on a recent summer Friday. Other than that? She doesn’t have many big regrets. 

    Haugen is dialing in from a moving car: Such is life on the public-speaking circuit, where she has spent much of the last two years since going public as the former employee whose disclosures so tanked the credibility of the company in question that you now know it by its rebranded name, Meta. 

    But for old time’s sake—and to preserve the historicity of Facebook still being Facebook back in 2021, when Haugen shared tens of thousands of internal documents detailing the platform’s systemic toxicity-for-profit mindset—Haugen and I both avoid that shiny new name throughout our conversation about the ensuing years of post–“Facebook Files” fallout. If we’re getting picky about regrets, Haugen, who resides in Puerto Rico these days, does wish she could have convened a broader consortium of journalists sooner to unpack the documents for the world. Otherwise, she’s glad we’re all here now, at this point in time when the danger of unregulated social media is such a public concern that even the surgeon general is getting involved. 

    “We’re talking about a culture-change issue, right?” Haugen reminds me when I press for any conclusive sense of societal progress made. She’s thinking of this juncture now as our potential parallel to the seatbelts discourse of the 1960s—and how it took concerted effort, particularly from one individual, Ralph Nader (from whom Haugen clearly draws personal inspiration), to pressure corporate forces to implement safety measures we now take for granted. “Back in 1965, the average person did not know that we could live in a world where we set steadily improving standards for car safety,” Haugen says. 

    This is the central theme of her work via her nonprofit, Beyond the Screen, as well as her memoir, The Power of One, published this week by Little, Brown and Company that this could be our seatbelts moment, where we finally demand a basic degree of consumer safety from the increasingly opaque tech platforms bending our reality to their whims—and one day, we’ll look back and shake our heads and wonder how it couldn’t have been more obvious.

    In conversation with Vanity Fair, Haugen discusses how she feels about the past two years of tech oversight, why she’s not as nervous about the advent of AI as you might think, the one stipulation she has for maybe even returning to Facebook one day, and why she thinks it’s worth saving at all. 

    This interview has been edited and condensed for clarity. 

    Vanity Fair: How do you feel about the timing of your memoir? We’re at quite an interesting point in the public’s relationship with social media.

    Frances Haugen: I was blindsided last week when the Surgeon General issued the advisory around teen mental health and social media. Like, two years ago, I was just leaving Facebook. I doubt either you or I thought there was any chance this was in the near term future. It really symbolizes for me that we are seeing an interesting moment culturally. 

    One of the things that I think most people aren’t aware of is that the Surgeon General has issued very few advisories, maybe less than 15 in the last 60 years, about the things that we take for granted now. It’s things like, seatbelts save lives. Smoking causes cancer. Breastfeeding is good for babies. Real mom and apple pie kind of stuff. Those advisories act as the period at the end of a sentence. 

    I worry a little bit that we’re reaching an inflection point where we can pass sensible moderate laws, like the Digital Services Act in the European Union, or we can start passing emotional and extreme laws, like straight up banning TikTok. I really hope my book can play a role in shaping the conversation around what our options are. Is there a third way, you know, that’s not a Chinese approach, but also not the laissez faire approach that got us to where we are right now?

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    Delia Cai

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  • Frustrated coastal home buyers contend with low inventory, high demand

    Frustrated coastal home buyers contend with low inventory, high demand

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    Orlando, Florida — Chrissy and Cole Robinson are finally unpacking in their newly purchased home after a daunting search in Northern California’s Silicon Valley.

    “There were 15 other offers on this house,” Chrissy Robinson told CBS News. 

    Silicon Valley home prices have seen some of the steepest declines in the nation, dropping 11.8% between April 2022 and April 2023, per Redfin. As a result, it’s drawing in buyers despite higher mortgage rates, according to real estate agent Kelly Dippel.

    “There’s more buyers than available homes,” Dippel said.

    The average 30-day mortgage is now at 6.91%, according to the Mortgage Bankers Association.

    “People that have locked in these low interest rates, are they really gonna wanna sell their house and buy something else for close to 7%?” Dippel explained. “They’re gonna hang on.”

    A four-bedroom, two-and-a-half bathroom home in San Jose, California, was listed for $1.5 million, an eye-popping number for most of the country. But in Silicon Valley, Dippel said, it’s “priced competitively.”

    California home prices jumped during the pandemic, but now, with tech industry layoffs and remote work, they have declined as some have chosen to move east to more affordable states, subsequently driving up home prices there.

    In Orlando, Florida, it has been a seller’s market, as home prices keep rising and inventory keeps falling.

    Orlando home shopper Avel Ramirez said he has had no luck so far.

    “I’m looking basically an hour out, into cities and towns that I don’t even know about,” Ramirez said.

    In the Orlando metropolitan area’s Orange and Seminole counties, the median price for a home jumped about 24% in two years, from $347,119 in March of 2021, to $431,875 in March of this year, according to the Orlando Regional Realtor Association.

    Buyers are advised to prepare to settle, bring cash offers and close quickly.

    “We’re saying them gone within three to five days,” Orlando real estate agent Heather Pryor said of the time homes are sitting on the market. 

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  • What SVB, Credit Suisse, and Other Bank Meltdowns Mean for Wall Street

    What SVB, Credit Suisse, and Other Bank Meltdowns Mean for Wall Street

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    “The nature of bank failures is that they tend to take people by surprise,” Zachary D. Carter tells Nick Bilton (sitting in for Joe Hagan and Emily Jane Fox) on this week’s episode of Inside the Hive. “Nobody thinks that it’s a crisis until it’s way out of hand, and all of a sudden, things get out of hand very quickly.”

    Carter, the author of The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes, recently wrote a piece titled “This Bank Panic Should Not Exist” for Vanity Fair. Here, he and Bilton talk through the domino effects of bank collapses—in terms of both human screwups and sheer fiscal luck—and what the ongoing debacle spells for the national and global economies.

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  • Silicon Valley Bank left a void that won’t easily be filled | CNN Business

    Silicon Valley Bank left a void that won’t easily be filled | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    It’s difficult to overstate the influence that Silicon Valley Bank had over the startup world and the ripple effect its collapse this month had on the global tech sector and banking system.

    While SVB was largely known as a regional bank to those outside of the tight-knit venture capital sphere, within certain circles it had become an integral part of the community – a bank that managed the idiosyncrasies of the tech world and helped pave the way for the Silicon Valley-based boom that has consumed much of the economy over the past three decades.

    SVB’s collapse was the largest bank failure since the 2008 financial crisis: It was the 16th largest bank in the country, holding about $342 billion in client funds and $74 billion in loans.

    At the time of its collapse, about half of all US venture-backed technology and life science firms were banking with SVB. In total, it was the bank for about 2,500 venture firms including Andreessen Horowitz, Sequoia Capital, Bain Capital and Insight Partners.

    But the influence of SVB went beyond lending and banking – former CEO Gregory Becker sat on the boards of numerous tech advocacy groups in the Bay Area. He chaired the TechNet trade association and the Silicon Valley Leadership Group, was a director of the Federal Reserve Bank of San Francisco and served on the United States Department of Commerce’s Digital Economy Board of Advisors.

    There’s no doubt that the failure of Silicon Valley Bank left a large void in tech. The question is how that gap will be filled.

    To find out, Before the Bell spoke with Ahmad Thomas, president and CEO of the Silicon Valley Leadership Group. The influential advocacy group is working to convene its hundreds of member companies – including Amazon, Bank of America, BlackRock, Google, Microsoft and Meta – to discuss what happens next.

    This interview has been edited for length and clarity.

    Before the Bell: What’s the feeling on the ground with tech and VC leadership in Silicon Valley?

    Ahmad Thomas: Silicon Valley Bank has been a key part of our fabric here for four decades. SVB was truly a pillar of the community and the innovation economy. The absence of SVB – that void – and coalescing leaders to fill that void is where my energy is focused and that is not a small task.

    I would say there was a fairly high level of unease a few days ago, and I believe the swift steps taken by leaders in Washington have helped quell a fair amount of that unease, but looking at Credit Suisse and First Republic just over the last couple of days, clearly we are in a situation that is going to continue to develop in the weeks and months ahead.

    So how do you fill it?

    We’re working to be a voice around stability, particularly about the fundamentals of the innovation economy. We can acknowledge the void given the absence of Silicon Valley Bank, but I do think we need voices out there to be very clear in highlighting that the fundamentals and the innovation infrastructure remains robust here in Silicon Valley.

    This is a moment where I think people need to take a step back, let cooler heads prevail, and understand that there are opportunities both from an investment standpoint, a community engagement standpoint and corporate citizenship standpoint for new leaders in Silicon Valley to step up.

    Are you working to advocate for more permanent regulation in DC?

    It’s far too early for that. But if there are opportunities to enhance access to capital to entrepreneurs to founders of color or in marginalized communities and if there are opportunities to try and drive innovation and economic growth, we will always be at the table for those conversations.

    Do you have any ideas about how long this crisis will continue for? What’s your outlook?

    The problem is twofold: A crisis of confidence and the set of economic conditions on the ground. The economic conditions remain volatile for a variety of reasons: The softening economy, inflationary pressures and the interest rate environment. But I think right now we need to focus on stabilizing confidence in the investor community, in our business executive community and in the broader set of stakeholders around the strength of the innovation economy. That is something we need to shore up near term.

    From CNN’s Mark Thompson

    Switzerland’s biggest bank, UBS, has agreed to buy its ailing rival Credit Suisse (CS) in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.

    “UBS today announced the takeover of Credit Suisse,” the Swiss National Bank said in a statement. It said the rescue would “secure financial stability and protect the Swiss economy.”

    UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.

    Extraordinarily, the deal will not need the approval of shareholders after the Swiss government agreed to change the law to remove any uncertainty about the deal.

    Credit Suisse had been losing the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its bookkeeping and as the demise of Silicon Valley Bank and Signature Bank spread fear about weaker institutions at a time when soaring interest rates have undermined the value of some financial assets.

    Read more here.

    From CNN’s David Goldman

    A week after Signature Bank failed, the Federal Deposit Insurance Corporation said it has sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.

    On Monday, Signature Bank’s 40 branches will begin operating as Flagstar Bank. Signature customers won’t need to make any changes to do their banking Monday.

    New York Community Bank bought substantially all of Signature’s deposits and a total of $38.4 billion worth of the company’s assets. That includes $12.9 billion of Signature’s loans, which New York Community Bank purchased at a steep discount -— it paid just $2.7 billion for them. New York Community Bank also paid the FDIC stock that could be worth up to $300 million.

    At the end of last year, Signature had more than $110 billion worth of assets, including $88.6 billion of deposits, showing how the run against the bank two weeks ago led to a massive decline in deposits.

    Not included in the transaction is about $60 billion in other assets, which will remain in the FDIC’s receivership. It also doesn’t include $4 billion in deposits from Signature’s digital bank business.

    Read more here.

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  • GOP Blames Silicon Valley Bank’s Failure on a Black Lives Matter Donation That Never Happened

    GOP Blames Silicon Valley Bank’s Failure on a Black Lives Matter Donation That Never Happened

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    In the world of right-wing punditry, the woke and anti-woke binary is the prevailing order for explaining nearly everything that happens in culture, politics, and business. When fresh meat falls into the news churn, it is promptly deemed woke or anti-woke, and an explanation for how either label applies is usually decided upon after the fact.

    Such backward logic was put on full display this week following the collapse of Silicon Valley Bank, the biggest American bank failure since 2008. In the immediate aftermath, SVB was ruled a casualty of wokeness by everyone from House Oversight chairman James Comer and Governor Ron DeSantis to Donald Trump Jr. Citing the women, Black, and LGBTQ+ members of its board, Wall Street Journal columnist Andy Kessler even theorized that the bank may have been too “distracted by diversity demands” to focus on banking.

    Lately, this slapdash reasoning has been refined: Republicans are now claiming the bank was not only felled by its emphasis on diversity but also the tens of millions it allegedly donated to Black Lives Matter. “Silicon Valley Bank, brace yourself, spent more than $73 million on donations to BLM and related organizations,” Fox News host Tucker Carlson said Tuesday, citing a report produced by the Claremont Institute, a right-wing think tank. His on-air colleagues Ainsley Earhardt, Jesse Watters, and Maria Bartiromo made similar declarations.

    The reality? Silicon Valley Bank has donated zero dollars to Black Lives Matter. That empty figure is even confirmed by a Claremont Institute database that tracks corporate pledges to the Black Lives Matter Global Network Foundation and its associated or related groups, which is probably why right-wing pundits are instead citing the think tank’s compilation of donations to “organizations and initiatives that advance one or more aspects of BLM’s agenda.” But that ill-defined description could mean any number of things. (It also doesn’t help that, as Popular Information noted, the Claremont Institute has described BLM’s agenda in remarkably broad terms, accusing the movement of conspiring to “undermine capitalism, the nation state, and Western civilization.”)

    Specifically, Republicans have objected to a pledge to spend $50 million over five years on an internal initiative aimed at elevating more women, Black people, and Latinos in the venture capitalist field, per Popular Information. So not quite the “Marxist” spending spree alleged by Fox Business host Larry Kudlow, an economist infamous for confidently predicting a market rebound days before Lehman Brothers collapsed.

    SVB’s $20 million pledge “to support additional COVID-19 relief” and provide “full-ride, needs-based” university scholarships was also included in the Claremont Institute’s math. Why that qualified as a donation to anything Black Lives Matter–related is an open question. And for what it’s worth, only one of the schools included in the program, Florida A&M, is a historically black university.

    Ultimately, the facts behind SVB’s collapse make for a far less fantastical narrative than a bank––one largely used by venture capitalists like the right-wing Peter Thiel, no less––overspending on anti-capitalist causes. SVB, the 16th largest bank in the US, appears to have failed due to poorly timed investments and faulty risk strategies that tied up the bulk of its depositors’ money during a harsh comedown period in the tech industry. When customers sensed trouble last week, a classic bank run ensued, with the bank being unable to meet the withdrawal demand.

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  • Who Is CEO of Silicon Valley Bank? From Becker to Mayopoulos | Entrepreneur

    Who Is CEO of Silicon Valley Bank? From Becker to Mayopoulos | Entrepreneur

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    All eyes are on Silicon Valley Bank after its spectacular crash, the second-largest in U.S. banking history. The Federal Deposit Insurance Corporation (FDIC) took control of the bank on Friday and moved to replace its CEO, Greg Becker, who had served in the role since 2011.

    The FDIC appointed Tim Mayopoulos as CEO of the newly renamed Silicon Valley Bridge Bank on Monday. He got to work quickly, urging clients to bring their money back to the bank during a Zoom call on Wednesday, according to CNBC.

    Keep scrolling for more details on the CEOs.

    RELATED: Billionaire Charles Schwab Has Lost Nearly $3 Billion of Personal Wealth Since Silicon Valley Bank Collapse

    What happened to former SVB CEO Greg Becker?

    Greg Becker started at Silicon Valley Bank as a loan officer and was with the company for nearly three decades. He’s credited with steering the bank through the 2008 financial crisis and was appointed CEO in 2011, according to Reuters.

    Before the bank’s collapse, he was viewed as a “champion of the innovation economy,” as he was referred to in a since-deleted profile on the Silicon Valley Bank website.

    RELATED: Kevin O’Leary Rips Into Silicon Valley Bank Amid Collapse: ‘It’s No Better Than Radioactive Waste’

    Becker has been scrutinized for reportedly selling $3.6 million in company stock just two weeks before the collapse, per Bloomberg. The sale was made under a trading plan he filed in January.

    Becker’s 2022 compensation was $9.9 million, per the Wall Street Journal. SVB’s compensation committee noted in a filing that his 2022 bonus — and that of SVB CFO Daniel Beck — was reduced to hold the executives accountable “for balance sheet pressures stemming from declining deposits and overall market environment.”

    Before his departure, Becker apologized to employees in a video message sent Friday. A Fed spokesperson also announced Friday that Becker was no longer on the board of the San Francisco Federal Reserve, per Bloomberg.

    Becker has sold SVB stock worth nearly $30 million over the past two years, per CNBC.

    RELATED: SVB Insider: Employees Angry With CEO Greg Becker

    Who is SVB’s new CEO Tim Mayopoulos?

    The FDIC appointed banking veteran Tim Mayopoulos to replace Becker as SVB CEO.

    Mayopoulos was Bank of America’s general counsel during the 2008 financial crisis and then served as president and CEO of the Federal National Mortgage Association, or Fannie Mae, per the New York Times.

    According to Time, Mayopoulos is a graduate of Cornell University and the New York University School of Law. In the 1990s he was part of the team that investigated Bill and Hillary Clinton’s real estate dealings, and his resume also includes time at Deutsche Bank and Credit Suisse. Before taking on the CEO role at SVB, Mayopoulos was president of Blend, a cloud-based software company for mortgages and consumer banking.

    RELATED: Employees Are Hawking Their Silicon Valley Bank Merch on eBay

    Mayopoulos sent a memo to clients on his first day as CEO.

    “I look forward to getting to know the clients of Silicon Valley Bank,” he wrote Monday, per Insider. “I come to this role with humility. I also come to this role with experience in these kinds of situations.”

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  • Watch Live Today: Keep Your Money Safe During the Bank Failure Panic | Entrepreneur

    Watch Live Today: Keep Your Money Safe During the Bank Failure Panic | Entrepreneur

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    Finance expert and entrepreneur Gene Marks will join us for a special livestream discussion on the impact of the recent bank failures on your personal and business assets. The event will begin at 2:00 PM EST, streaming live on Entrepreneur’s YouTube, LinkedIn and Twitter channels.

    Where can I watch?

    Watch and stream: YouTube, LinkedIn & Twitter

    You can watch on your phone, tablet or computer. Our livestream will be shown in its entirety on YouTube, LinkedIn and Twitter

    What time does the livestream start?

    Time: 2:00 PM EST

    The episode kicks off at 2:00 PM EST.

    Why should I watch the livestream?

    Gene Marks is an author, CPA, business owner, and national business columnist for The Hill, The Guardian, Entrepreneur, The Philadelphia Inquirer, and other well-known outlets. He will expertly break down the recent bank failures and what they mean for entrepreneurs. In this informative session, you’ll learn about the steps you can take to protect yourself and your business.

    Watch Now >>

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    Entrepreneur Staff

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  • The Wall Street Journal Goes Full White Supremacist, Blames Silicon Valley Bank Collapse on “1 Black” and “1 LGBTQ+”

    The Wall Street Journal Goes Full White Supremacist, Blames Silicon Valley Bank Collapse on “1 Black” and “1 LGBTQ+”

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    As you’ve probably heard by now, on Friday, Silicon Valley Bank—a lender to some of the most notable names in the tech world—became the biggest bank to fail since the 2008 financial crisis. How did this happen? Not surprisingly, a multitude of factors appear to have contributed to the company’s downfall, including its failure to account for rising interest rates; venture capital drying up; a prevalence of uninsured depositors, who usually ask for their money back when things are looking bad; and a lack of regulatory oversight, thanks to one Donald Trump. One reason SVB probably did not fail? The presence of a few women, one Black person, and an individual who identifies as LGBTQ+ on its board. Though The Wall Street Journal isn’t so sure!

    In an op-ed titled “Who Killed Silicon Valley Bank?” columnist Andy Kessler writes: “Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund. Then there’s this: In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have ‘1 Black,‘ “1 LGBTQ+,‘ and ‘2 Veterans.’ I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”

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    Sure, Kessler is not flatly, literally saying “12 white men would have avoided this mess,” because even David Duke knows you can’t just come out and say that in 2023. But…he’s basically saying exactly that, hence the claim that the bank might have failed because it was “distracted” by supposedly burdensome “diversity demands.” (Here’s where we’d like to point out that having “1 Black” person on a 12-person board means that that board is still 92% white. The same math goes for that “1 LGBTQ+” person.) Weirdly, Kessler did not note, alongside his thesis, that SVB’s executive team doesn’t appear to have been plagued by “diversity demands.” He also apparently did not feel the need to acknowledge that all of the major banks that failed during the Great Recession were largely run by white guys.

    As tech columnist Brian Merchant tweeted Monday, this piece “is basically an argument in favor of racial purity at a bank’s board of directors.” Not surprisingly, others were similarly unimpressed.

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  • The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

    The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

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    CNN
     — 

    For much of the weekend, Silicon Valley scrambled to find a way through what one prominent tech investor described as an “extinction-level event for startups” after the collapse of a top lender in the industry.

    Startups raced to line up loans from venture funds and fintech firms to make payroll. Venture-backed retailers hosted last-minute sales to boost their cash reserves. And at least one prominent startup accelerator convinced thousands of CEOs and founders to sign an “urgent” petition calling for Treasury Secretary Janet Yellen and others to offer “relief.”

    Then, late Sunday, federal officials stepped in to guarantee that all customers of the failed Silicon Valley Bank would have access to their full deposits on Monday. The sense of relief was palpable throughout the tech sector.

    “Obviously, I’m quite relieved,” said Stefan Kalb, co-founder and CEO of Seattle-based startup Shelf Engine, who told CNN that his company would have had to shut down by the end of the week without the government intervention. “It was a very stressful weekend and I’m quite relieved with the news.”

    Parker Conrad, the CEO of HR platform Rippling, who had previously said some customers’ payrolls were being delayed by the bank failure, tweeted Sunday: “Anyone else breathing a sigh of relief and looking forward to a good night’s sleep tonight?”

    And Garry Tan, the CEO of tech startup accelerator Y Combinator who authored the petition to Yellen, praised the federal government for “decisive action.” Tan, the investor who had previously warned of “an *extinction level event* for startups” that would “set startups and innovation back by 10 years or more,” added his appreciation on Sunday for “everyone who helped us through a very very intense time.”

    But even as the tech industry enjoys a respite from a fearful weekend, unknowns remain. “You can feel the collective *sigh*,” Ryan Hoover, a tech founder and investor wrote on Twitter Sunday. “I’m still nervous,” he added. “Hard to predict the collateral effects.”

    It’s unclear how the aftershocks of the bank’s collapse will add to the startup industry’s growing challenges accessing capital. SVB’s collapse also risks changing how the world, and prospective recruits, think of Silicon Valley.

    For years, the term itself conjured an image of an enclave of bright, contrarian, libertarian engineers and thinkers who could see around corners and make big bets on the future. Now, that same industry is relying on the federal government to survive after failing to see the risk, or worse, contributing to it through a shared hysteria.

    In the chaotic days leading up to the bank’s collapse on Friday, some venture firms reportedly urged their portfolio companies to withdraw their money, which may have contributed to the bank failing.

    Then, over the weekend, many venture capitalists and tech founders banded together to try and lobby government and public goodwill towards saving the companies impacted by Silicon Valley Bank’s sudden collapse.

    While some VCs appeared to embrace fear-mongering on Twitter, much of the public messaging focused on the small businesses with exposure to Silicon Valley Bank that might be not be able to continue operating after losing access to the money in their bank account.

    “We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy,” the Y Combinator petition stated. “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank.”

    A separate coalition of more than a dozen venture capital firms, including Lightspeed Venture Partners and Upfront Ventures, released a joint statement late Friday supporting Silicon Valley Bank, given its unique and vital role in the startup economy. The bank worked with nearly half of all venture-backed tech and healthcare companies in the United States.

    “For forty years, it has been an important platform that played a pivotal role in serving the startup community and supporting the innovation economy in the US,” the statement read. “In the event that SVB were to be purchased and appropriately capitalized, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them.”

    Even before the bank’s collapse, the startup industry was in a tough moment. Venture capital funding had dwindled amid rising interest rates and broader macroeconomic uncertainty; tech companies were cutting staff and ambitious projects; and some of the biggest private companies were reportedly slashing their valuations.

    The instability at a top tech lender, and the lingering questions about its impact on other regional banks and the broader financial system, risk making it even harder for money-losing startups to access the capital they need to survive.

    President Joe Biden emphasized in remarks Monday that “no losses will be borne by the taxpayers” related to the government’s intervention for Silicon Valley Bank. But some are already skeptical of that statement, including Democratic Sen. Elizabeth Warren of Massachusetts, who wrote in an op-ed Monday morning, “We’ll see if that’s true.”

    More immediately, there’s uncertainty around how long it will take for companies to get their money out of the bank.

    As of Monday, Kalb said the money in his Silicon Valley Bank account has not been transferred yet to the new JPMorgan Chase account he set up for Shelf Engine on Thursday. “I’ve been obsessively checking my email,” he said. “Hopefully the money will be able to be transferred shortly.”

    Ben Kaufman, the co-founder of venture-backed toy store and online retailer Camp, told CNN’s Poppy Harlow in an interview Monday morning that he and his team spent the weekend trying to “fight for survival,” including holding a last-minute 40% off sale, using the code “BANKRUN,” to raise capital over the weekend.

    “We did not know how long it was going to take for us to get our cash out … we still kind of don’t, they say today, we’ll see what happens,” he said, noting the bank held 85% of his company’s assets. “We hope we can, and we’re so grateful that the Fed stepped in, and the way they did.”

    When asked if the past week’s events would change how and where he stores his money, Kaufman said that is “going to have to be a consideration moving forward.”

    “I don’t want to do this again,” he said.

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  • Unlikely any other bank can provide services equivalent to Silicon Valley Bank’s, says venture capital firm

    Unlikely any other bank can provide services equivalent to Silicon Valley Bank’s, says venture capital firm

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    Lu Zhang of Fusion Fund says Silicon Valley Bank had products that could uniquely meet the needs of venture capitalists and startup founders.

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  • Silicon Valley Bank collapse: Most banking systems in Asia-Pacific are stable, Moody’s says

    Silicon Valley Bank collapse: Most banking systems in Asia-Pacific are stable, Moody’s says

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  • Can The Chaos From Silicon Valley Bank’s Fall Be Contained?

    Can The Chaos From Silicon Valley Bank’s Fall Be Contained?

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    NEW YORK (AP) — Can Washington come to the rescue of the depositors of failed Silicon Valley Bank? Is it even politically possible?

    That was one of the growing questions in Washington Sunday as policymakers tried to figure out whether the U.S. government — and its taxpayers — should bail out a failed bank that largely served Silicon Valley, with all its wealth and power.

    Prominent Silicon Valley personalities and executives have been hitting the giant red “PANIC” button, saying that if Washington does not come to the rescue of Silicon Valley bank’s depositors, more bank runs are likely.

    “The gov’t has about 48 hours to fix a soon-to-be-irreversible mistake,” Bill Ackman, a prominent Wall Street investor, wrote on Twitter. Ackman has said he does not have any deposits with Silicon Valley Bank but is invested in companies that do.

    Some other Silicon Valley personalities have been even more bombastic.

    “On Monday 100,000 Americans will be lined up at their regional bank demanding their money — most will not get it,” Jason Calacanis wrote on Twitter. Calacanis, a tech investor, has been close with Elon Musk, who recently took over the social media network.

    Silicon Valley Bank failed on Friday, as fearful depositors withdrew billions of dollars from the bank in a matter of hours, forcing U.S. banking regulators to urgently close the bank in the middle of the workday to stop the bank run. It’s the second-largest bank failure in history, behind the collapse of Washington Mutual at the height of the 2008 financial crisis.

    Silicon Valley Bank was a unique creature in the banking world. The 16th-largest bank in the country largely served technology startup companies, venture capital firms, and well-paid technology workers, as its name implies. Because of this, the vast majority of the deposits at Silicon Valley Bank were in business accounts with balances significantly above the insured $250,000 limit.

    Its failure has caused more than $150 billion in deposits to be now locked up in receivership, which means startups and other businesses may not be able to get to their money for a long time.

    Staff at the Federal Deposit Insurance Corporation — the agency that insures bank deposits under $250,000 — have worked through the weekend looking for a potential buyer for the assets of the failed bank. There have been multiple bidders for assets, but as of Sunday morning, the bank’s corpse remained in the custody of the U.S. government.

    Despite the panic from Silicon Valley, there are no signs that the bank’s failure could lead to a 2008-like crisis. The nation’s banking system is healthy, holds more capital than it has ever held in its history, and has undergone multiple stress tests that shows the overall system could withstand even a substantial economic recession.

    Further, it appears that Silicon Valley Bank’s failure appears to be a unique situation where the bank’s executives made poor business decisions by buying bonds just as the Federal Reserve was about to raise interest rates, and the bank was singularly exposed to one particular industry that has seen a severe contraction in the past year.

    Investors have been looking for banks in similar situations. The stock of First Republic Bank, a bank that serves the wealthy and technology companies, went down nearly a third in two days. PacWest Bank, a California-based bank that caters to small to medium-sized businesses, plunged 38% on Friday.

    While highly unusual, it was clear that a bank failure this size was causing worries. Treasury Secretary Janet Yellen as well as the White House, has been “watching closely” the developments; the governor of California has spoken to President Biden; and bills have now been proposed in Congress to up the FDIC insurance limit to temporarily protect depositors.

    “I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said on “Face the Nation” on Sunday.

    But Yellen made it clear in her interview that if Silicon Valley is expecting Washington to come to its rescue, it is mistaken. Asked whether a bailout was on the table, Yellen said, “We’re not going to do that again.”

    “But we are concerned about depositors, and we’re focused on trying to meet their needs,” she added.

    Sen. Mark Warner, D-Virginia, said on ABC’s “This Week” that it would be a “moral hazard” to potentially bail out Silicon Valley’s uninsured depositors. Moral hazard was a term used often during the 2008 financial crisis for why Washington shouldn’t have bailed out Lehman Brothers.

    The growing panic narrative among tech industry insiders is many businesses who stored their operating cash at Silicon Valley Bank will be unable to make payroll or pay office expenses in the coming days or weeks of those uninsured deposits are not released. However, the FDIC has said it plans to pay an unspecified “advanced dividend” — i.e. a portion of the uninsured deposits — to depositors this week and said more advances will be paid as assets are sold.

    The ideal situation is the FDIC finds a singular buyer of Silicon Valley Bank’s assets, or maybe two or three buyers. It is just as likely that the bank will be sold off piecemeal over the coming weeks. Insured depositors will have access to their funds on Monday, and any uninsured deposits will be available as the FDIC sells off assets to make depositors whole.

    Todd Phillips, a consultant and former attorney at the FDIC, said he expects that uninsured depositors will likely get back 85% to 90% of their deposits if the sale of the bank’s assets is done in an orderly manner. He said it was never the intention of Congress to protect business accounts with deposit insurance — that the theory was businesses should be doing their due diligence on banks when storing their cash.

    Protecting bank accounts to include businesses would require an act of Congress, Phillips said. It’s unclear whether the banking industry would support higher insurance limits as well, since FDIC insurance is paid for by the banks through assessments and higher limits would require higher assessments.

    Philips added the best thing Washington can do is communicate that the overall banking system is safe and that uninsured depositors will get most of their money back.

    “Folks in Washington need to be forcefully countering the narrative on Twitter coming from Silicon Valley. If people realize they are going to get 80% to 90% of your deposits back, but it will take awhile, it will do a lot to stop a panic,” he said.

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  • Camp toy store pleads for help after Silicon Valley Bank collapse | CNN Business

    Camp toy store pleads for help after Silicon Valley Bank collapse | CNN Business

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    New York
    CNN
     — 

    A toy company based in New York has gotten caught up in the collapse of Silicon Valley Bank and is pleading with customers for help keeping it afloat.

    Camp, a venture-backed retailer, sent an email to customers Friday announcing it was slashing prices and would use sales to help fund its continued operations after much of its money was tied up in the bank failure.

    “Unfortunately, we had most of our company’s cash assets at a bank which just collapsed. I’m sure you’ve heard the news,” co-founder Ben Kaufman said in an email to customers.

    He urged customers to use the code “BANKRUN” to save 40% off all merchandise, in an apparent nod to the run on the bank that may have helped bring down the Silicon Valley lender. Camp also said customers could pay full price, which it said would be appreciated.

    Kaufman said the company was “hopeful that this will be resolved soon.”

    CNN has not confirmed if Camp had funds with Silicon Valley Bank when the bank collapsed.

    Silicon Valley Bank was put under control of the US Federal Deposit Insurance Corporation on Friday, capping off a stunning 48 hour period during which fears of a liquidity crisis at the firm prompted some startups to weigh withdrawing funds.

    The sudden collapse of the Silicon Valley lender has pushed tech investors and startups to scramble to figure out their financial exposure to the bank, with founders worrying about getting their money out, making payroll and covering operating expenses.

    The rapidly unfolding fallout at Silicon Valley Bank comes at a challenging moment for startup and tech industries. Rising interest rates have eroded the easy access to capital that helped fuel soaring startup valuations and funded ambitious, money-losing projects.

    Kaufman, a former BuzzFeed executive, founded Camp in 2018. It has nine stores in California, Connecticut, Massachusetts, New York, New Jersey and Texas.

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  • Silicon Valley Bank shut down by regulators. Here’s what to know.

    Silicon Valley Bank shut down by regulators. Here’s what to know.

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    California regulators on Friday abruptly shuttered Silicon Valley Bank, closing a 40-year-old financial institution that catered to the tech industry and that was the 16th largest U.S. bank before its sudden collapse. The company’s stock tumbled 60% on Thursday and had plunged another 70% on Friday before trading of its shares was halted. 

    The nosedive reflected fears of a bank run, concerns that materialized as depositors — mostly technology company workers and venture capital-backed companies — rushed to withdraw money this week as anxiety over the bank’s balance sheet spread. 

    Regulators stepped in to take control, with the California Department of Financial Protection and Innovation closing the bank and appointing the Federal Deposit Insurance Corporation (FDIC) as receiver. It’s the largest failure of a financial institution since Washington Mutual in 2008 at the height of the financial crisis more than a decade ago. 

    On Friday evening, tech firms including streaming company Roku and video game developer Roblox issued regulatory filings disclosing their exposure to Silicon Valley Bank. Roku told investors it had $487 million at the bank, or about 26% of its cash and cash equivalents, adding that those fund are “largely uninsured.” Roblox said about 5% of its $3 billion in cash and securities were held at Silicon Valley Bank.

    Typically, bank stocks are staid affairs, which makes Silicon Valley Bank’s failure and its regulator-ordered closure all the more noteworthy. Here’s what to know about the bank’s startling downfall. 

    What is Silicon Valley Bank? 

    Silicon Valley Bank, founded in 1983, grew rapidly with the explosion of businesses in the tech-focused region, eventually expanding to more than a dozen states and countries including Israel, Ireland and Germany. Before its failure, it ranked as the 16th largest bank in the country, holding $210 billion in assets. 

    Silicon Valley Bank offers business lending products such as loans to help finance acquisitions or projects, touting on its website that it “helps businesses at every stage.” The bank also provides private banking services and other financial products. 

    Why was it closed by regulators? 

    The California Department of Financial Protection and Innovation on Friday said it has taken possession of Silicon Valley Bank. The reason, it said, was “inadequate liquidity and insolvency.”

    What happens to depositors and clients? 

    The FDIC said it created a new institution, the Deposit Insurance National Bank of Santa Clara (DINB), and that it had immediately transferred all insured deposits at Silicon Valley Bank to the new bank. All insured depositors will have access to their insured deposits by Monday morning, March 13, the FDIC said in a statement.

    Meanwhile, uninsured depositors will receive “an advance dividend within the next week,” as well as a receivership certificate for the remaining amount of their uninsured funds.

    The main office and its 17 branches will reopen for business on March 13, the FDIC said. 

    “Banking activities will resume no later than Monday, March 13, including on-line banking and other services,” the agency said. “Silicon Valley Bank’s official checks will continue to clear.”

    The standard insurance from FDIC covers $250,000 for each depositor per insured bank. That limit is also per ownership category, such as single accounts or retirement accounts, so one person may have assets with insurance coverage that exceeds $250,000, the FDIC says.

    What are bank customers saying?

    One Silicon Valley Bank client, FarmboxRx CEO Ashley Tyrner CEO, told CBS MoneyWatch that the events of the last 24 hours have “been nothing short of shocking.”

    Tyrner, whose company works with health care plans to deliver food to underserved communities, said she was surprised to learn about the financial challenges facing Silicon Valley Bank.

    “By the time we began seeing articles it was already a full-swing bank run,” Tyrner said in an email. “It seems that while the venture capital circle was publicly boasting their support for SVB in attempt to stabilize the panic, they were calling their portfolio companies behind closed doors telling them to move funds immediately.”

    She said her company wasn’t able to log into its accounts and that the bank’s help line had a “disconnected” message or hung up. “[N]one of our account reps would respond to calls or emails,” she added. 

    Tyrner said she plans on moving the remaining funds in the account once she regains access to it.

    Why did the bank collapse? 

    On March 8, Silicon Valley Bank parent SVB Financial Group said that it was taking “strategic actions,” including selling almost all of its available-for-sale securities — $21 billion in bonds. It also said it planned to issue stock as part of the plan to raise capital and strengthen its finances. 

    SVB, which noted that it would take a $1.8 billion loss on the bond sales, said it needed to take the steps because of higher interest rates and “elevated cash burn levels” by customers. The company also pointed to “pressured public and private markets.”

    The bank’s heavy exposure to the tech sector played a part in its downfall, noted Chenxi Wang, founder and general partner of Rain Capital, in an email. Some of its tech company clients were burning through cash faster than expected in early 2023, Silicon Valley Bank said in its March 8 investor letter. That resulted in lower deposits than forecast, according to the bank.

    Silicon Valley Bank’s problems were exacerbated by rapidly rising interest rates over the last year, which reduced the value of its bond holdings. 

    “The bank also made balance sheet management errors by putting too much money into long-term bonds, which became a problem when interest rates surged,” Wang said. That “caused non-trivial panic.”

    The March 8 announcement spooked investors, sparking concerns that clients would yank funds due to the bank’s financial uncertainty, which in turn would limit the bank’s ability to tap other liquidity sources, said Brandon King, an analyst at Truist, in a note to investors.

    “The stock reaction today is evident of concerns around the bank’s liquidity,” King said.

    What are tech investors saying? 

    Prior to California’s decision to shutter the bank, the reaction within Silicon Valley ranged the gamut, with Founders Fund, a venture capital firm co-founded by Peter Thiel, advising companies to take their money out of the bank, Bloomberg News reported. 

    But others had urged companies and clients to stay put, such as Two Sigma Ventures investor Villi Iltchev, an investor, who wrote on Twitter that Silicon Valley Bank deserved support. “SVB is the most important capital provider to tech startups and the biggest supporter of the community. Now is the time to support them,” tweeted Villi.

    The question was whether clients would opt to remain with the bank or trigger a classic bank run. Fears about an institution’s possible insolvency can become self-fulfilling if enough customers pull their money out of the bank. 

    “Banks are not like normal companies, and one in crisis can’t wait to run a normal auction process — they depend on the confidence of depositors and even an inkling of doubt can snowball faster than nearly anyone imagines, impairing the value of the franchise,” wrote Wall Street analyst Adam Crisafulli of Vital Knowledge in a report.

    How is this impacting Wall Street and other banks? 

    Other bank stocks fell Thursday as Silicon Valley Bank shares swooned. Banks lost a total of about $100 billion in market value over the last two days, according to Reuters.

    Still, analysts said that Silicon Valley Bank’s woes are unlikely to ripple through the banking industry as a whole.

    “Current pressures facing SIVB are highly idiosyncratic and should not be viewed as a read-across to other banks,” Morgan Stanley analysts Manan Gosalia and Betsy Graseck wrote in a note Friday, according to CNBC.

    Silicon Valley Bank could yet impact a major part of the U.S. economy in that tech companies could lose a valuable source of financing, noted Bill Ackman, CEO of hedge fund Pershing Square, on Twitter. 

    “The failure of [Silicon Valley Bank] could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash,” he noted.

    On Friday, large, diversified banks such as Bank of America and JPMorgan Chase pulled out of an early slump due to data released Friday by the Labor Department. 

    Regional banks, particularly those with heavy exposure to the tech industry, were in decline. Yet it has been a bruising week, with shares of major banks are down this week between 7% and 12%.

    With reporting by the Associated Press.

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