Essay by Eric Worrall
h/t resourceguy; Apparently the SVB collapse has shaken the market, leading to increased due diligence.
Climate tech startups face ‘massive hole’ after Silicon Valley Bank collapse
Grace O’Donnell
Editor, Special Projects
Thu, April 6, 2023 at 8:37 PM GMT+10When Silicon Valley Bank (SVB) suddenly collapsed in the second-largest bank failure in U.S. history, many startups and their VC backers focused on sustainability and tackling climate change sprang into action to secure their funds.
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“There is a massive hole in that slice of the climate capitalization pie that’s missing,” Sophie Purdom, managing partner at Planeteer Capital, told Yahoo Finance at the recent Techonomy conference. “SVB did play this really essential role in the ecosystem because they were willing to take on technologically perceived riskier types of clients than maybe the bigger four or so banks were willing to mess around with. These tend to be smaller companies, smaller accounts, [with] higher risk premiums.”
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And climate tech companies still have options to raise capital through equity and debt, though overall it will likely become harder for companies to get funding.
“What this bank collapse is going to do, hopefully, is increase the due diligence process of the investors into these VC-backed startups, which is going to continue to slow that funding,” Kyle Stanford, senior analyst of VC at PitchBook, told Yahoo Finance Live (video above). “It’s going to make it more difficult for these companies to raise capital even … than it’s already been.”
Read more: https://finance.yahoo.com/news/climate-tech-startups-face-massive-hole-after-silicon-valley-bank-collapse-103701346.html
In this case, surely increased due diligence is a good thing.
Silicon Valley Bank, which collapsed a few weeks ago, didn’t have an official risk officer for the 8 months between between April 2022 and January 2023.
I don’t think you have to be a financial expert to be concerned that such a prolonged failure to appoint a risk officer might be an indicator SVB were taking unwise risks with depositors money, and likely contributed to the collapse.
No doubt finding a qualified gender/race/ideologue appropriate risk officer is quite difficult.
Its San Francisco area , they literally could find one armed lesbian black risk officers in MacDonalds
Now that’s funny!
But Maccas promise us that they use Angus beef.
If the proposal is like Pets.com, or any of the “renewable energy” proposals, with no real way to earn income, but a scheme to attract gullible investors, not being able to raise seed money is a good thing.
Subsidy mining only works as a business model for awhile, until the sufficiently
gullible politicians get voted out.
Apparently, no lesson was learned from Obama’s Solyndra debacle or Az gov Ducey’s Lucid EV disaster.
Lesson for whom? investors in green companies learned that with the government guarantees, they can invest with all of the upside at no risk. The Energy Department and Arizona governor learned that there is no political downside with their constituents for losing money that does not belong to them from losses in green investments.
The Biden administration learned that they can increase the pool of money to feed their green constituency with hundreds of billions in the Inflation Reduction Act and buy votes for the midterm elections and nobody cares.
Republicans learned that there is no bottom to the amount of money that we do not have that democrats will spend on green projects, but the Republicans knew that to begin with.
Ah yes, the official line from Obama was “we don’t pick winners” which translated into “no due dilligence accepted” and ” any shunned deal on Wall Street is good with us, especially those with political connections”.
The continuing lesson is get your executive bonuses on your way out the door after sucking up to the green political commanders.
story tip
SVB
Silicon Valley Bank CEO cashed out stock while employees got pre-collapse bonuses | Washington Examiner
Solyndra
Green Firms Get Fed Cash, Give Execs Bonuses, Fail – ABC News (go.com)
SVB, Signature Bank and Silvergate Capitol.
It was actually an attack on crypto, specifically USDC (U S. Dollar Coin), a ‘Stable Coin’. Unfortunately, the powers that be didn’t figure on the ‘Law of Unintended Consequences’ so, they got a bank run and a lot of people looking at the solvency of their banks. Several of which are currently in worse shape than SVB or Signature Bank were.
None of that . Occams razor . They didnt cover the credit risk of interest rates rising so quickly and were caught with US bonds worth less than face value. A bank run by the very same SV tech types did the rest.
Yep, Biden triggered inflation with his wild spending and war on affordable energy. So if you want to blame anyone, blame Biden for triggering the crisis.
Of course, it seems likely a bank which doesn’t take appointing a risk officer seriously would have blown up at the first road bump. Biden just happened to supply the road bump.
The bank did not have a risk officer because they did not WANT a risk officer. The CEO, CFO, and the director from KPMG are smart financial people, and they knew that their assets were underwater compared to their liabilities. They did not want a risk officer pointing out the obvious.
Finance 101 is to match the duration of assets to liabilities. Their deposits were short term liabilities, which they invested in long term Treasuries to make money on the spread between short term paper paying .5% and 10 year notes paying 1,5%.
Thanks to Democrats Dodd/Frank, they classified the 10 year notes as hold to maturity. As interest rates rose, and bond values plummeted, they did not have to mark the assets to market, and run the market loss through the income statement and balance sheet. This effectively allowed them to hide their greedy high risk strategy of borrowing short and lending long.
Biden and Fed idiotically have compounded the moral risk by effectively adding $18 trillion in unfunded liabilities to the US debt when they decided to cover all deposits of any amount, rather than the FDIC limit of $250,000.
“The CEO, CFO, and the director from KPMG are smart financial people, and they knew that their assets were underwater compared to their liabilities.”
Yes, they did. There was an audit about a year prior to them going under that showed the bank was at risk, and I believe there was another audit within the last few months that said the same thing.
Also, one of the bank officers was on the Federal Reserve Board for that area, so should have been well aware of all the problems they were facing.
And here was I thinking that SVB had tanked because it had put too much money into tech start-ups.
The SVB officers were gambling on having very low interest rates for a long time into the future.
They lost their bet.
The Novel Green Deal has been funded, but has yet to be redistributed, and the capital returns are likely to be sequestered in social rackets. There is also the problem of securing green spaces through the Urbane Housing Effect (UHE) and blue spaces through the Environmental Chilling Effect (ECE) to spread the Green blight where people… persons, flora, and fauna once lived.
Biden’s forcing taxpayers to bail out the investors.
Naturally, the question is what percentage goes to fund his friends’ future elections and what percentage goes back to the Big Guy himself?
That “Big Guy” bank account must be huge!
A few old sayings come to mind
“you reap what you sow”
“the chickens are coming home to roost “
“Obama is at his seaside mansion”
There had been concerns about SVB for over a year but the regulator failed to do anything about it.
They did do something about it….
Silicon Valley Bank CEO cashed out stock while employees got pre-collapse bonuses | Washington Examiner
from the Sacramento Bee
Ah, there is indeed a silver lining to this bogus bank’s failure after all.
The irony – the list of metaphors. analogies, and old common-sense sayings that apply is long.
Things will be more difficult for “climate tech” companies? Sounds like good news, for a change.
You see that is the wonder of the free market, now everybody should know what doesn’t work. Renewable energy does not work, the earth is not in a climate crisis. It is time to invest in safe, reliable and clean fossil fuel and nuclear. We know they work.
Many of these corporations were speculating in the new field of “subsidy mining”.
Much more profitable than the old schemes of selling shares in proposed oil wells, since Uncle Sam is now your Sugar Daddy.