Venture capital and private equity firms reportedly working on acquiring parts of SVB

Venture capital and private equity firms reportedly working on acquiring parts of SVB

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Venture capital firms and private equity groups are reportedly working on plans to acquire and preserve parts of Silicon Valley Bank to continue serving clients in the technology sector.

The Financial Times reports that a group of more than a dozen VC firms, including General Catalyst Group LLC, Andreessen Horowitz LLC and Khosla Ventures LLC, have been holding talks on enabling SVB to continue lending to, investing in, and advising companies in the sector. One of the proposals is said to include the formation of a consortium with Apollo Global Management Inc. to bid for portions of SVB.

The group of VCs is said to have also spoken to large “buyout houses” to fund the effort, with Credit Suisse First Boston said to be advising on potential ways to structure the deal.

Bloomberg reports separately that Apollo has expressed interest in snapping up a book of loans held by SVB. The Information also names Apollo but adds that Redpoint Ventures LLC and Upfront Ventures Management LLC are also involved in the talks.

SVB, the bank of choice for many startups, tech companies and investors in Silicon Valley, was closed by the California Department of Financial Protection and Innovation on Friday following a bank run that resulted in the bank being unable to provide funds to depositors. The bank had tied up around 65% of its investor funds in treasury and government bonds before the rise in interest rates, leaving them stuck with assets that they could only liquidate at a loss.

Coming into this week, there were serious concerns that the failure of SVB could have a contagion effect on the broader market and that startups with exposure to SVB would not be able to meet payroll obligations.

To the undoubted relief of SVB customers, the Department of the Treasury, Federal Reserve and Federal Deposit Insurance Corp. announced on Sunday that it would guarantee depositor funds and make them available to customers on Monday. The bailout of sorts did not extend to SVB shareholders and debt holders, with the government planning on levying other banks to cover its costs.

How long it may take for various plans to come together to purchase parts of SVB isn’t clear from reports. The FDIC held an auction over the weekend, but no buyer emerged; its options going forward include either a new auction or attempts to sell assets, including loan books, privately.

There is some irony that venture capital firms are swarming around SVB like vultures – it was venture capital firms that helped fuel the SVB bank run that led to this point.

“The efforts to salvage something from the wreckage of SVB, which was shut down by regulators last week, underscore the importance of the institution to venture capitalists,” the Financial Times writes, before adding, “it also marks a striking turnaround for venture funds that were accused last week of fuelling a run on the bank.”

Photo: Charles  J. Sharp/Wikimedia Commons

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