SVB Collapse - Solutions
Resources to help founders and investors facing issues due to the collapse of Silicon Valley Bank
Hi folks, Patrick Ryan here from Odin.
Our first product makes it fast and easy for anyone to raise capital from their network.
We take care of legal stuff (SPV’s, carried interest), KYC & AML, regulatory, payment flows and everything in between. Our goal: empower more people to participate in shaping humanity's future.
It’s been a troubling few days for the global tech ecosystem.
Yesterday, Silicon Valley Bank, the cornerstone banking provider of global tech companies and venture capital firms, collapsed. It has been shut down by regulators.
Firstly, I want to reassure you that neither Odin, nor any of our affiliated SPV entities or companies, use any banking services provided by SVB. We are not affected.
In short, here’s what happened:
10 years of low interest rates and VC spending meant that they had $200B in customer deposits by late 2021
They decided to get some yield by investing in bonds, but the value of those bonds dropped due to interest rate rises. They sold at a loss of $1.8B
They tried to raise some money a few days ago to shore up their balance sheet. The announcement of their dire financial situation caused their share price to tank over 50% in a day.
This caused mass panic, and a run on the bank. Twitter plus every founder and investor WhatsApp and Slack group exploded with messages saying “take your money out”. There was $42 billion in outflows all within a <12 hour period.
The regulators stepped in.
There will be huge short-term liquidity issues (next 3 - 6 months or so) for founders and investors. Put another way - people won’t have access to cash. This is affecting tens of thousands of people in the UK, as well as the majority of the US ecosystem.
Nothing is certain, but in the longer term, it seems unlikely companies won’t get 90%+ of their money back - this bank is probably too big to fail, and has plenty of remaining assets that can be sold to generate cash.
In the intervening period, we are using our infrastructure and network to support founders and investment firms as much as we can.
Here is a list of startup ecosystem resources - banking providers, emergency credit lines and funding solutions. You can add to the list, please do if you know anything useful that we have missed!
We have worked with our lawyers, RW Blears, to release a free to use Unsecured Bilateral Loan Agreement, and a free Advanced Subscription Agreement (ASA). These document allow you to secure money in the form of a loan, or advance funds for future equity, from investors to support your cashflows whilst you wait for the crisis to resolve itself. If you need a good legal firm to review documents before signing, Ollie Blears, Frank Daly and the entire Blears team are world class.
You can set up a new multi-currency bank account pretty much anywhere in the world really quickly with Wise. We use them for our investment infrastructure.
You can use an Odin Founder SPV to raise capital quickly and easily from your network in a few clicks. This is useful if you have multiple smaller investors that you want to borrow from - allows you to raise the money without messing up your cap table.
If you’ve been affected, take care.
And remember - like all challenges in life, this too shall pass.
Paddy, Mary and the Odin Team
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