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Half of the companies in the U.S. devoted to climate change and biotech banked with the now-failed Silicon Valley Bank (SVB), leaving many of those companies looking for financial backers willing to take on the risk.
As San Francisco Bay Area public radio station KQED reports, many of those companies received funding from SVB because other banks were less willing to fund investments that had lower chances of providing a return:
Nearly half of the country’s bio- and climate-technology companies, many of them headquartered in the Bay Area, banked with Silicon Valley Bank. Last year, SVB committed to investing at least $5 billion in the clean tech industry.
But even as the FDIC quickly stepped in to guarantee deposits, following the bank’s collapse, many companies have been scrambling to find new banks, open accounts and reorganize payroll systems.
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To his point, SVB was widely known for incubating ambitious climate and biotech startups, and was a valuable resource for new companies looking for a bank willing to invest in innovative and somewhat risky ventures.
Kimberley Strassel, a columnist for the Wall Street Journal, quoted one source who called such investments “subprime business loans”:
Most of these companies weren’t filling some vital market need. Rather, as the Journal reported, SVB was beloved for its willingness to offer “banking services to startups that often weren’t profitable, in some cases didn’t have a product, and would otherwise have a hard time getting a line of credit or a loan from a larger bank.” One tech entrepreneur provided law.com a more scathing description of SVB’s products: “They’re basically subprime business loans. You’re talking about companies that have no credit profile, they’re burning cash and are unlikely to raise the same type of capital because of interest rates. . . . It was basically social credit.”