Silicon Valley Bank: How Exposed Are AgTech Companies?

Silicon Valley Bank

The fall of Silicon Valley Bank has created a sense of panic in the financial sector, as investors and analysts fear a domino effect with other companies seeing significant blows to their accounts. This concern stems from the fact that many startups and high-tech companies held accounts at SVB, and the bank’s collapse has left hundreds of entrepreneurs desperate to get their cash out in the 24 hours leading to their bankruptcy. This event is particularly significant as SVB is the largest bank bankrupt a decade after the infamous Lehman Brothers that caused the Global Financial crisis of 2008.

Venture capitalists are also feeling the impact of Silicon Valley Bank’s fall, as higher interest rates and the increasing cash burn rate of startups have already hit them. In addition, the bank’s collapse has created further uncertainty and instability in a volatile market. The FDIC has taken control of the bank and has announced that insured depositors will have access to their deposits no later than Monday morning. However, it is worth noting that the FDIC’s coverage only extends to $250K per depositor.

The fall of Silicon Valley Bank has also raised concerns about the stability of other financial institutions that held a significant proportion of SVB. Banks and other financial institutions are closely monitored, as there is a risk of further collapses in the next few days or weeks. The bank had tried to raise funds, but on Wednesday, it was reported that they were looking for more than $2 billion in additional capital after suffering a $1.8 billion loss on asset sales.

How Exposed Are AgTech Companies?

The bankruptcy of Silicon Valley Bank has sent shockwaves through the agtech sector, with many prominent companies and startups affected. While it is difficult to ascertain precisely how many agtech companies held accounts with the bank, some of the most notable clients include Bowery Farming, Farmers Business Network, and Impossible Foods. These companies have raised significant funding rounds and have been instrumental in advancing innovation in the agriculture and food production industries.

Bowery Farming, in particular, is one of the largest vertical farming companies in the world, with multiple extensive facilities in operation and plans to expand in the coming years. Farmers Business Network provides a platform for farmers to make informed decisions about their operations and ensure economic viability and has raised over $870M. Impossible Foods is a leader in developing plant-based substitutes for animal products and has raised nearly $2 billion in funding rounds. It is worth noting that no statement has been made on the significance of the bank’s blow, so it is impossible to know how much it affected them.

The impact of the bankruptcy is not limited to the US, with regulators in the UK already taking action to minimize the fallout for businesses in England. In Israel, there are fears that the bankruptcy could have a ripple effect on the country’s entire startup ecosystem, while India faces the potential for widespread bankruptcies. In addition, the situation has prompted many other countries and organizations to monitor the situation closely, with concerns mounting in the wake of Powell’s recent speech, which raised the possibility of additional interest rate hikes and further economic instability.

Updates On Monday Morning

The Telegraph reported that HSBC has managed to avoid a crisis in Britain’s tech sector by striking a deal to buy the collapsed Silicon Valley Bank UK. The purchase comes after intense weekend negotiations between lenders, the Treasury, and start-ups. The collapse of SVB UK over the weekend led to the Bank of England taking control of the lender due to a bank run on its US branch, rendering it unviable. This collapse put thousands of British tech companies and investors who relied on the start-up-focused SVB UK as their bank of choice at risk. However, with HSBC buying SVB UK’s business, operations will continue as usual for SVB UK, and the crisis has been averted.

US financial regulators have announced emergency measures to contain the fallout from the collapse of Silicon Valley Bank. These measures include providing depositors access to all their funds starting Monday, March 13th. In addition, the regulators have assured the public that taxpayers will not bear any losses related to the resolution of SVB. Following the bank’s collapse on March 10th, 2023, US authorities took action to protect depositors and plan to reopen branches on March 13th under a federally-run entity. The situation has sparked concerns about a potential crisis in the tech sector, which is already facing unprecedented layoffs. However, Federal Reserve Chair Janet Yellen has attempted to allay fears, stating that conditions do not resemble the 2008 financial crisis and that the $23tn US banking system is not at risk from the fall of a regional bank. Nonetheless, the Biden administration is working with regulators to help depositors affected by the SVB collapse.

PNC Financial Group has reportedly decided not to bid on the assets of Silicon Valley Bank, as regulators were struggling to find a buyer for the failed bank’s assets over the weekend. The Pittsburgh-based bank had sent an initial notice of interest to the Federal Deposit Insurance Corp (FDIC) regarding a deal for SVB and held brief and preliminary discussions with the agency. According to CNBC, PNC had conducted initial due diligence on the failed bank, SVB, and had informed the FDIC on Saturday that it would not proceed with the acquisition. Meanwhile, the FDIC was conducting an auction for SVB over the weekend, with final bids due on Sunday.

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