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A view of Silicon Valley Bank headquarters in Santa Clara, CA, after the federal government intervened upon the bankâs collapse, on March 13, 2023.

Nikolas Liepins | Anadolu Agency | Getty Images

Silicon Valley Bank was the go-to for startups seeking bankers who understood the startup life and balance sheets. That was especially true for the cohort of startups being built and scaled to address climate change.

After a very stressful weekend for many startup founders and investors, banking regulators hatched a plan to backstop SVB’s deposits, ensuring that depositors won’t lose their money.

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Founded in 1983 specifically to help startups, SVB had a strong and established business in climate, boasting 1,550 climate tech and sustainability clients, according to its website.

“Silicon Valley Bank had a very good reputation in the energy transition space and were willing to put their money where their mouth is, unlike many of their peers,” said Mona Dajani, the head of renewable energy and infrastructure law at Shearman and Sterling.

“Many clean energy companies banked with SVB because they had an established and dedicated clean energy practice and they were perceived to have more experience in the clean energy space than most regional and big bulge bracket peers,” Dajani told CNBC.

But the climate space has grown up since SVB started, and that paves the way for new lenders to serve the market.

“Fundamentally, the companies that are coming out climate right now have real strength. These are foundational companies, and people are going to want to lend to them because it’s good business,” explained Katie Rae, the CEO of The Engine, an accelerator and venture fund focusing on tough tech, including climate startups.

“Just in the last three days, I probably have 50 emails in my inbox from different providers saying, ‘Hey, I know SVB is not in good shape. We also do venture debt.’ So many are going to emerge,” Rae told CNBC in a phone conversation on Tuesday.

Wind turbines operate at a wind farm, a key power source for the Coachella Valley, on February 22, 2023 near Whitewater, California.

Mario Tama | Getty Images

Understanding how startups work

Venture-backed startups are an unusual type of business. In their early stages, they may not have cash flow, revenues, or even customers. Instead, they rely on venture funding, where investors offer cash in exchange for equity, hoping that the startups prove out their technology, find customers, and eventually grow into giants.

Providing banking to those kinds of customers requires special skills and an appetite for risk.

“Nobody understands startups as well as Silicon Valley Bank and how to lend to them,” says Zachary Bogue, a long-time tech investor and cofounder of DCVC.

“I envision a startup’s application getting simplify annihilated by a big bank’s risk committee,” Bogue told CNBC.

That was exactly Bill Clerico‘s experience back in May 2009. When Clerico moved to Silicon Valley with Rich Aberman to grow their fintech company, WePay, they had a Bank of America small business account, but the account didn’t have the services the startup needed.

“Silicon Valley Bank understood that even though we may have only had $10,000 or so in deposits at the time, we had a lot of potential,” Clerico told CNBC.

As it turned out, SVB was right to bet on Clerico. WePay was acquired by JP Morgan Chase in December 2017.

“That early investment in our relationship paid off,” Clerico told CNBC. “Over time our deposit balances grew to hundreds of millions, we borrowed millions from them in venture debt, and we processed billions through their accounts.”

In Jan. 2022, Clerico launched Convective Capital, a $35 million venture capital fund investing in wildfire technolog. He ardently hopes somebody can fill the gap left by SVB.

“Some folks may conflate their balance-sheet-driven meltdown with the failure of this startup-focused business model — but in fact, I think that banking startups continues to be a great business and a role that someone needs to fill,” Clerico told CNBC. (Notably, Clerico is an angel investor in Mercury, a startup working to meet this need.)

“I hope SVB and their business model persists in some form,” Clerico said.

President Biden on SVB fallout: No losses will be borne by American taxpayers

The ‘1,000-pound gorilla’ of venture debt lending

In the climate tech ecosystem, SVB was especially prominent in making loans to companies with venture capital funding, known as “venture debt.” It’s essential for startups who are still not generating enough cash flow to be self-sustainable, especially when they are between funding rounds.

“It adds a little bit to the capital that they’ve raised, extends their runway a little bit and gives them more time to make progress on their business,” Rae told CNBC. Venture debt can add between three to six months to the runway companies already have, Rae said.

“There are other places that do venture debt, but Silicon Valley Bank was the 1,000-pound gorilla in the room,” said Ami Kassar, the CEO of the business lending consultant Multifunding.

“The concern now is that even in instances where deposits are made whole, the credit facilities for companies with SVB are likely no longer available, and this is a sector where those are critical,” said Dajani.

That said, making loans to venture-backed companies is a riskier endeavor than traditional banking, Kassar told CNBC.

“I always wondered how they managed to have the regulators allow them to have such a heavy concentration of venture debt,” Kassar said.

Solar panels are set up in the solar farm at the University of California, Merced, in Merced, California, August 17, 2022.

Nathan Frandino | Reuters

Climate is good business

SVB was an early supporter of climate technology, helping a lot of these companies get off the ground. But as the sector has matured, participants believe other financiers will be more willing to lend to these companies.

“Silicon Valley Bank’s early support and commitment to supporting climate tech startups certainly helped catalyze the enormous migration of capital that you’re now seeing deployed into the sector,” Adam Braun, a founder of the climate startup Climate Club, told CNBC.

For instance, SVB provided financing to 60% of community solar projects, says Kiran Bhatraju, the CEO of Arcadia, a climate technology company that, among many services, helps people connect to community solar projects.

In this, the bank “was a climate bank pioneer,” said Steph Speirs, co-founder and CEO of Solstice Power Technologies, which has built a technology to help connect people to community solar projects.

“But renewables have come a long way in the last decade and there’s now a much wider universe of potential financiers looking to get on board,” Speirs said.

That’s what Braun expects to see, too.

“I believe we’ll see many more institutions build dedicated climate practices and funds to support startups emerging in this space,” Braun told CNBC. “While SVB may have been a first mover, I don’t think the events of last week will diminish the desire to finance and support the emerging companies that are leading the rapidly growing climate tech sector forward.” 

First Republic and JP Morgan are “increasingly making this category a priority,” Chauncy Hamilton, a partner at the venture capital firm XYZ, told CNBC. “More and more banks are paying attention to climate,” Hamilton said.

Mark Casady, a founder of the venture capital firm Vestigo Ventures, agrees.

“Climate solutions are too powerful a force to be stopped by the failure of a bank.  The need is critical and time is not on our side to find solutions.  Since this is a fundamental need, it will get more backing rather than less,” Casady told CNBC.  

That transition will take time, however. And for companies working to combat global warming, time is the ultimate enemy.

“I do expect big banks to ultimately step up and provide the financing the industry needs to move forward — these projects are just too attractive and the promise of climate tech is too great. But it will take some time, and delays can be costly in the fight against climate change,” Bhatraju told CNBC.

“With all the new investment in climate tech and the opportunities ahead afforded by the IRA [Inflation Reduction Act], there is a ton of momentum. We don’t want to lose that,” Bhatranju said.

The rise of the carbon removal industry

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Chinese medical devices are in health systems across U.S., and the government and hospitals are worried

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Chinese medical devices are in health systems across U.S., and the government and hospitals are worried

A popular medical monitor is the latest device produced in China to receive scrutiny for its potential cyber risks.  However, it is not the only health device we should be concerned about. Experts say the proliferation of Chinese health-care devices in the U.S. medical system is a cause for concern across the entire ecosystem. 

The Contec CMS8000 is a popular medical monitor that tracks a patient’s vital signs.  The device tracks electrocardiograms, heart rate, blood oxygen saturation, non-invasive blood pressure, temperature, and respiration rate.  In recent months, the FDA and the Cybersecurity and Infrastructure Security Agency (CISA) both warned about a “backdoor” in the device, an “easy-to-exploit vulnerability that could allow a bad actor to alter its configuration.”  

CISA’s research team described “anomalous network traffic” and the backdoor “allowing the device to download and execute unverified remote files” to an IP address not associated with a medical device manufacturer or medical facility but a third-party university — “highly unusual characteristics” that go against generally accepted practices, “especially for medical devices.”

“When the function is executed, files on the device are forcibly overwritten, preventing the end customer—such as a hospital—from maintaining awareness of what software is running on the device,” CISA wrote.

The warnings says such configuration alteration could lead to, for instance, the monitor saying that a patient’s kidneys are malfunctioning or breathing failing, and that could cause medical staff to administer unneeded remedies that could be harmful. 

The Contec’s vulnerability doesn’t surprise medical and IT experts who have warned for years that medical device security is too lax. 

Hospitals are worried about cyber risks

“This is a huge gap that is about to explode,” said Christopher Kaufman, a business professor at Westcliff University in Irvine, California, who specializes in IT and disruptive technologies, specifically referring to the security gap in many medical devices.

The American Hospital Association, which represents over 5,000 hospitals and clinics in the U.S., agrees. It views the proliferation of Chinese medical devices as a serious threat to the system. 

As for the Contec monitors specifically, the AHA says the problem urgently needs to be addressed. 

“We have to put this at the top of the list for the potential for patient harm; we have to patch before they hack,” said John Riggi, national advisor for cybersecurity and risk for the American Hospital Association.  Riggi also served in FBI counterterrorism roles before joining the AHA. 

CISA reports that no software patch is available to help mitigate this risk, but in its advisory said the government is currently working with Contec. 

Contec, headquartered in Qinhuangdao, China,  did not return a request for comment. 

One of the problems is that it is unknown how many monitors there are in the U.S. 

“We don’t know because of the sheer volume of equipment in hospitals. We speculate there are, conservatively, thousands of these monitors; this is a very critical vulnerability,” Riggi said, adding that Chinese access to the devices can pose strategic, technical, and supply chain risks. 

In the short-term, the FDA advised medical systems and patients to make sure the devices are only running locally or to disable any remote monitoring; or if remote monitoring is the only option, to stop using the device if an alternative is available. The FDA said that to date it is not aware of any cybersecurity incidents, injuries, or deaths related to the vulnerability.

The American Hospital Association has also told its members that until a patch is available, hospitals should make sure the monitor no longer has access to the internet, and is segmented from the rest of the network.

Riggi said the while the Contec monitors are a prime example of what we don’t often consider among health care risk, it extends to a range of medical equipment produced overseas. Cash-strapped U.S. hospitals, he explained, often buy medical devices from China, a country with a history of installing destructive malware inside critical infrastructure in the U.S.  Low-cost equipment buys the Chinese potential access to a trove of American medical information that can be repurposed and aggregated for all sorts of purposes. Riggs says data is often transmitted to China with the stated purpose of monitoring a device’s performance, but little else is known about what happens to the data beyond that. 

Riggi says individuals aren’t at acute medical risk as much as the information being collected and aggregated for repurposing and putting the larger medical system at risk. Still, he points out that, at least theoretically, is can’t be ruled out that prominent Americans with medical devices could be targeted for disruption. 

“When we talk to hospitals,  CEOS are surprised, they had no idea about the dangers of these devices, so we are helping them understand.  The question for government is how to incentivize domestic production, away from overseas,”  Riggi said. 

Chinese data collection on Americans

The Contec warning is similar at a general level to TikTok, DeepSeek, TP-Link routers, and other devices and technology from China that the U.S. government says are collecting data on Americans. “And that is all I need to hear in deciding whether to buy medical devices from China,” Riggi said. 

Aras Nazarovas, an information security researcher at Cybernews, agrees that the CISA threat raises serious issues that need to be addressed. 

“We have a lot to fear,” Nazarovas said. Medical devices, like the Contec CMS8000, often have access to highly sensitive patient data and are directly connected to life-saving functions.  Nazarovas says that when the devices are poorly defended, they become easy prey for hackers who can manipulate the displayed data, alter vital settings, or disable the device completely.  

“In some cases, these devices are so poorly protected that attackers can gain remote access and change how the device operates without the hospital or patients ever knowing,” Nazarovas said. 

The consequences of the Contec vulnerability and vulnerabilities in an array of Chinese-made medical devices could easily be life-threatening.  

“Imagine a patient monitor that stops alerting doctors to a drop in a patient’s heart rate or sends incorrect readings, leading to a delayed or wrong diagnosis,” Nazarovas said. In the case of the Contec CMS8000, and Epsimed MN-120 (a different brand name for the same tech), warning from the government, these devices were configured to allow remote code execution by the remote server.  

“This functionality can be used as an entry point into the hospital’s network,” Nazarovas said, leading to patient danger.  

More hospitals and clinics are paying attention. Bartlett Regional Hospital in Juneau, Alaska, does not use the Contec monitors but is always looking for risks. “Regular monitoring is critical as the risk of cybersecurity attacks on hospitals continues to increase,” says Erin Hardin, a spokeswoman for Bartlett.  

However, regular monitoring may not be enough as long as devices are made with poor security. 

Potentially making matters worse, Kaufman says, is that the Department of Government Efficiency is hollowing out departments in charge of safeguarding such devices. According to the Associated Press, many of the recent layoffs at the FDA are employees who review the safety of medical devices. 

Kaufman laments the likely lack of government supervision on what is already, he says, a loosely regulated industry. A U.S. Government Accountability Office report as of January 2022, indicated that 53% of connected medical devices and other Internet of Things devices in hospitals had known critical vulnerabilities. He says the problem has only gotten worse since then. “I’m not sure what is going to be left running these agencies,” Kaufman said.

“Medical device issues are widespread and have been known for some time now,” said Silas Cutler, principal security researcher at medical data company Censys. “The reality is that the consequences can be dire – and even deadly. While high-profile individuals are at heightened risk, the most impacted are going to be the hospital systems themselves, with cascading effects on everyday patients.”  

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Substack boosts video capabilities amid potential TikTok ban

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Substack boosts video capabilities amid potential TikTok ban

Rafael Henrique | SOPA Images | AP

After posting almost 200 videos, amassing hundreds of thousands of followers and racking up millions of views, Carla Lalli Music is quitting YouTube. Substack is her new focus. 

Music is a cookbook author and food content creator, and she is shifting her focus to Substack, a subscription platform that lets creators charge users subscriptions for access to their content. Music told CNBC she came to that decision after earning more in one year of using Substack, nearly $200,000 in revenue, than she did by posting videos on YouTube since 2021. 

Music is the exact kind of content creator that Substack is trying to lure to its platform as TikTok’s future in the U.S. remains in limbo. 

San Francisco-based Substack launched in 2017 as a tool for newsletter writers to charge readers a monthly fee to read their content. The platform allows creators to connect to their followers directly without having to navigate algorithmic models that control when their content is shown, as is the case on TikTok, Google’s YouTube and other social platforms. Substack has raised about $100 million, most recently at a post-money valuation of more than $650 million, the company told CNBC.

This year, Substack has broadened its focus beyond newsletters, and on Thursday, it announced that creators can now post video content directly through the Substack app and monetize these videos.

“There’s going to be a world of people who are much more focused on videos,” Substack Co-founder Hamish McKenzie told CNBC. “That is a huge world that Substack is only starting to penetrate.”

Substack began this push after the social media landscape was thrown into flux as a result of the effective ban of TikTok in January that caused the popular Chinese-owned service to go offline for a few hours. TikTok was also removed from Apple and Google’s app stores for nearly a month. 

The disruption to TikTok in January happened as a result of a law signed by former President Joe Biden to force a sale of the Chinese-owned app or have it effectively banned in the U.S. On his first day in office, President Donald Trump signed an executive order extending TikTok’s ability to operate in the U.S., but that order expires on April 5. 

Days after TikTok went offline, Substack launched a $20 million fund to court creators to its platform.

“If TikTok gets banned for political reasons, there’s nothing to do with the work you’ve done, but it really affects your life,” McKenzie said. “The only and surefire guard against that is if you don’t place your audience in the hands of some other volatile system who doesn’t care about what happens to your livelihood.”

Moving beyond newsletters

McKenzie says that they are going after creators on competing social media platforms to start sharing their video content on Substack.

“Video-first creators, people who are mobile oriented, there’s a whole lot of new possibility waiting to be unlocked once they meet this model in the right place,” McKenzie said. 

Already, Substack has more than 4 million paid subscriptions with over 50,000 creators who make money on the platform, the company said. Substack says that 82% of its top 250 revenue-generating creators have already integrated audio or video into their content, reflecting a growing emphasis on multimedia content.

Prior to the video announcements, Substack allowed creators to post videos on the app to Notes, which is the platform’s front-facing feed format. But the feature did not allow creators to publish video content behind Substack’s paywalls. 

The update enables creators to put video content behind a paywall and it provides data on estimated revenue impact. It also allows them to track viewership and new subscribers.

Carla Lalli Music is a cookbook writer and food creator.

Carla Lalli Music

Our base case for TikTok is that it gets banned in the U.S.: Lead Edge Capital's Mitchell Green

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Anne Wojcicki has a new offer to take 23andMe private, this time for $74.7 million

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Anne Wojcicki has a new offer to take 23andMe private, this time for .7 million

Anne Wojcicki attends the WSJ Magazine Style & Tech Dinner in Atherton, California, on March 15, 2023.

Kelly Sullivan | Getty Images Entertainment | Getty Images

23andMe CEO Anne Wojcicki and New Mountain Capital have submitted a proposal to take the embattled genetic testing company private, according to a Friday filing with the U.S. Securities and Exchange Commission.

Wojcicki and New Mountain have offered to acquire all of 23andMe’s outstanding shares in cash for $2.53 per share, or an equity value of approximately $74.7 million. The company’s stock closed at $2.42 on Friday with a market cap of about $65 million.

The offer comes after a turbulent year for 23andMe, with the stock losing more than 80% of its value in 2024. In January, the company announced plans to explore strategic alternatives, which could include a sale of the company or its assets, a restructuring or a business combination. 

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23andMe has a special committee of independent directors in place to evaluate potential paths forward. The company appointed three new independent directors to its board in October after all seven of its previous directors abruptly resigned the prior month. The special committee has to approve Wojcicki and New Mountain’s proposal.

“We believe that our Proposal provides compelling value and immediate liquidity to the Company’s public stockholders,” Wojcicki and Matthew Holt, managing director and president of private equity at New Mountain, wrote in a letter to the special committee on Thursday.

Wojcicki previously submitted a proposal to take the company private for 40 cents per share in July, but it was rejected by the special committee, in part because the members said it lacked committed financing and did not provide a premium to the closing price at the time.

Wojcicki and New Mountain are willing to provide secured debt financing to fund 23andMe’s operations through the transaction’s closing, the filing said. New Mountain is based in New York and has $55 billion of assets under management, according to its website.

23andMe declined to comment.

WATCH: The rise and fall of 23andMe

The rise and fall of 23andMe

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