Life was already tough for startups. Funding had dropped to the lowest in five years, venture capital investors were getting skittish, and wealthy angels started holding onto their cash instead of sharing it like candy. Then Silicon Valley’s own bank shut its doors, halting payrolls and forcing founders to stop managing their businesses and focus on the only thing that matters: cashflow.
When the nexus of entrepreneurship woke Monday morning after a weekend full of uncertainty, they learnt that while Silicon Valley Bank may not be saved, the deposits it held are safe. That doesn’t mean countless fledgling companies are, though, nor the lifestyles the more-wealthy among them enjoyed.
Startups in the tech hub raised less than $10 billion during the fourth quarter, the lowest since 2017 according to CB Insights. Only 465 deals were inked in that period, the fewest in five years. Ironically, SVB’s collapse had little direct relationship to the slowdown in funding. Instead, VCs and founders are getting a lesson in interest rate and duration risk.