Silicon Valley Bank signed exclusive banking deals with some clients, leaving them unable to diversify
A delivery person drops off pizzas at Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023.
Noah Berger | AFP | Getty Images
Silicon Valley Bank had exclusivity clauses with some of its clients, limiting their ability to tap banking services from other institutions, SEC filings show.
The contracts, which made it impossible for those clients to safely diversify where they kept their money, varied in language and scope. CNBC has reviewed six agreements that companies signed with SVB regarding financing or credit solutions. All required the companies to open or maintain bank accounts with SVB and use the firm for all or most of their banking services.
Those arrangements are particularly problematic now that SVB has been seized by federal regulators after last week’s run on the bank. The Federal Deposit Insurance Corporation only insures up to $250,000 in deposits for each client, leaving SVB’s customer base, which is heavily concentrated in tech startups, fearful that millions of dollars in operating funds would be locked up for an indefinite period of time.
Banking regulators devised a plan Sunday to backstop depositors with money at SVB to try and stem a feared panic across the industry after the second-biggest bank failure in U.S. history.
In this photo illustration an Upstart Holdings logo is seen on a smartphone screen.
Pavlo Gonchar | SOPA Images | LightRocket | Getty Images
As part of a multi-million dollar financing agreement with online-lending platform Upstart Holdings, SVB required that the company maintain all of its “operating and other deposit accounts, the Cash Collateral Account and securities/investment accounts” with SVB.
The contract made certain allowances for accounts at other banks, but set strict limits on their size.
“We haven’t had the exclusivity obligation for years and more than 90% of our cash is held at top five US banks,” Upstart said in a statement to CNBC.
Cloud software vendor DocuSign also had an exclusivity contract with SVB, filings show, requiring that the e-signature company keep its “primary” depository, operating, and securities accounts with the bank. That covenant was part of a senior secured credit facility between DocuSign and SVB dated May 2015. DocuSign was allowed to keep existing deposit accounts that were held at Wells Fargo.
Upstart held its IPO in 2020, two years after DocuSign’s debut.
SVB provided a multi-million dollar loan to Sprout Social, which went public in 2019. The bank required that the social media management software company maintain all of its “primary operating and other deposit accounts, the Cash Collateral Account and securities/investment accounts” with SVB.
As with Upstart, SVB set strict limits on the value and type of accounts that Sprout could hold elsewhere.
“Sprout Social does not have any current exclusivity obligations with Silicon Valley Bank. We’re a publicly traded company with a balanced position across multiple financial institutions,” a Sprout spokesperson said in a statement, adding that the company maintained more than $100 million in short-term investments and had more than $80 million in cash.
In another loan and security agreement with Limelight Networks, which became Edgio, SVB required that the company similarly maintain all “operating accounts, depository accounts, and excess cash with Bank and Bank’s Affiliates.”
The contract included an exception for international bank accounts but required that Limelight use only SVB’s business credit cards.
Founded 40 years ago, SVB grew to become the 16th largest U.S. bank by assets and a major venture debt provider, supporting companies in their infancy and providing the type of liquidity that startups couldn’t get from most traditional banks.
SVB didn’t immediately respond to a request for comment.
Dexcom signed a loan and security agreement with SVB, requiring the maker of products for managing diabetes to maintain its accounts at the bank and to transfer cash held elsewhere within 90 days of the contract.
Dexcom’s agreement with SVB also required the company to open a lockbox and maintain the “majority” of the company’s securities accounts with the bank.
“Dexcom does not have material exposure to SVB, nor any exclusive relationship, since the contract referenced expired in 2016,” the company said in a statement to CNBC.
Also within the health-tech market, SVB had an exclusivity contract with Hyperion Therapeutics, a drugmaker that was acquired in 2015 for $1.1 billion by Horizon Pharma.
Hyperion was required to bank only with SVB, but notably did not have to give the firm control over any accounts it used for “payroll, payroll taxes, and other employee wage and benefit payments.”
Representatives from DocuSign, Edgio, and Horizon didn’t immediately respond to requests for comment.
WATCH: Cramer on SVB’s collapse
Microsoft CEO Satya Nadella leaves after attending a meeting with Indonesian President Joko Widodo at the Presidential Palace in Jakarta, Indonesia, on April 30, 2024.
Willy Kurniawan | Reuters
Microsoft on Tuesday said that it’s laying off 3% of employees across all levels, teams and geographies.
“We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace,” a Microsoft spokesperson said in a statement to CNBC.
The company reported better-than-expected results, with $25.8 billion in quarterly net income, and an upbeat forecast in late April.
Microsoft had 228,000 employees worldwide at the end of June, meaning that the move will affect thousands of employees.
It’s likely Microsoft’s largest round of layoffs since the elimination of 10,000 roles in 2023. In January the company announced a small round of layoffs that were performance-based. These new job cuts are not related to performance, the spokesperson said.
One objective is to reduce layers of management, the spokesperson said.
Last week cybersecurity software provider CrowdStrike announced it would lay off 5% of its workforce.
In January, Microsoft CEO Satya Nadella told analysts that the company would make sales execution changes that led to lower growth than expected in Azure cloud revenue that wasn’t tied to artificial intelligence. Performance in AI cloud growth outdid internal projections.
“How do you really tweak the incentives, go-to-market?” Nadella said. “At a time of platform shifts, you kind of want to make sure you lean into even the new design wins, and you just don’t keep doing the stuff that you did in the previous generation.”
On Monday, Microsoft shares stopped trading at $449.26, the highest price so far this year. They closed at a record $467.56 last July.
WATCH: Microsoft will continue as the best performing mega-cap stock in 2025: D.A. Davidson’s Gil Luria
Hinge Health co-founders Gabriel Mecklenburg (left) and Daniel Perez (right).
Courtesy of Hinge Health
Hinge Health said in a filing on Tuesday that it plans to raise up to $437 million in its upcoming initial public offering.
The digital physical therapy startup filed its initial prospectus in March, and it updated the document with an expected pricing range for its Class A common stock of $28 to $32 per share. Hinge said it plans to sell about 13.7 million shares in the offering.
Based on the number of Class A and Class B shares outstanding after the offering, the deal would value the company at $2.42 billion in the middle of the range, though that number could be higher on a fully diluted basis.
Hinge, founded in 2014, uses software to help patients treat acute musculoskeletal injuries, chronic pain and carry out post-surgery rehabilitation remotely. The company was co-founded by CEO Daniel Perez and Executive Chairman Gabriel Mecklenburg, who have both experienced personal struggles with physical rehabilitation.
Three weeks after Hinge filed its initial prospectus, President Donald Trump announced a sweeping tariff policy that plunged U.S. markets into turmoil. That volatility has caused several companies, including online lender Klarna and ticket marketplace StubHub, to delay their long-awaited IPOs.
Hinge is forging ahead anyway, and a second digital health startup, virtual chronic care company Omada Health, filed to go public on Friday. Both IPOs will be closely watched by the digital health sector, which has been mostly devoid of public offerings since 2021.
During its first quarter, Hinge said that revenue climbed 50% to $123.8 million, up from $82.7 million during the same period last year. Hinge reported $117.3 million in revenue during its fourth quarter, up 44% from the same period in 2023.
The company plans to trade on the New York Stock Exchange under the ticker symbol “HNGE.”
Hinge has raised more than $1 billion from investors including Tiger Global Management and Coatue Management, and it boasted a $6.2 billion valuation as of October 2021, the last time the company raised outside funding. The biggest institutional shareholders are venture firms Insight Partners and Atomico, which own 19% and 15% of the stock, respectively, according to its prospectus.
WATCH: IPO window likely to open in first half of 2026: PitchBook
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