SVB’s failure will have a ripple effect across technology ‘for years to come’
Silicon Valley Bank’s collapse could have ramifications for the technology landscape over the coming years, analysts and investors said.
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Silicon Valley Bank was the backbone of many startups and venture capital funds around the world. The effects of its collapse, the biggest banking failure since the 2008 financial crisis, is likely to be felt across the technology landscape globally over the coming years.
“With SVB in essence the Godfather of the Silicon Valley banking ecosystem for the past few decades in the tech world, we believe the negative ripple impact of this historical collapse will have a myriad of implications for the tech world going forward,” Dan Ives, analyst at Wedbush Securities, said in a note on Tuesday.
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SVB’s collapse began last week when it said it needed to raise $2.25 billion to shore up its balance sheet. Venture capital firms told their portfolio companies to withdraw money from the bank and other clients looked to get their cash before it became unobtainable. This effectively led to a bank run.
The bank had to sell assets, mainly bonds, at a massive loss.
U.S. regulators shut down SVB on Friday and took control of its deposits. Regulators then said Sunday that depositors at SVB would have access to their money, in a move aimed at stopping further contagion.
But the episode has the potential to impact the technology world in several ways, from making it harder for startups to raise funds to forcing firms to change their business model, according to investors and analysts who spoke to CNBC.
‘Last thing we needed’
SVB was critical to the growth of the technology industry, not just in the U.S. but in places like Europe and even China.
The 40-year old institution had an intimate link to the technology world offering traditional banking services as well as funding companies that were deemed too risky for traditional lenders. SVB also provided other services like credit lines and lines to startups.
When times were good, SVB thrived. But over the past year, the U.S. Federal Reserve has hiked interest rates, hurting the once high-flying technology sector. The funding environment has got harder for startups in the U.S., Europe and elsewhere.
SVB’s collapse has come at an already difficult time for startup investors.
“This whole Silicon Valley Bank thing is the last thing we needed and was completely unexpected,” Ben Harburg, managing partner of Beijing, China-based venture capital fund MSA Capital, told CNBC.
Startups have had to tighten their belt while technology giants have axed tens of thousands of workers in a bid to cut costs.
In such an environment, SVB played a key role in providing credit lines or other instruments that allowed startups to pay their employees or ride out hard times.
“Silicon Valley Bank was very paternalistic to this sector, they not only provided payroll services, loans to founders against their illiquid credit, but lines of credit as well. And a lot of these companies were having trouble already raising equity and they were counting on those lines to extend their runway, to push out the cash burn beyond the recession we all expect.” Matt Higgins, CEO of RSE Ventures, told CNBC’s “Street Signs Asia” on Tuesday.
“That evaporated overnight and there’s not another lender that’s going to be stepping in to fill those shoes.”
Paul Brody, global blockchain leader at EY, told CNBC on Monday that a crypto firm called POAP, which is run by his friend, has half of the company’s money tied up in SVB and can’t get it out. The amount at SVB is “more than payroll can cover.” Patricio Worthalter, founder of POAP, told CNBC that the company had a “substantially high amount” of its treasury in SVB and has managed to retrieve 50%. However, payroll was “never at risk” and the company has “solid credit lines to tap into” if required, the founder added.
‘Reboot’
The SVB collapse will also likely put the focus on startups to pivot to profitability and be more disciplined with their spending.
“Companies will have to reboot the way they think about their business,” Adam Singolda, CEO of Taboola, told CNBC’s “Last Call” on Monday.
Hussein Kanji, co-founder of London-based Hoxton Ventures, said that over the next three years there will be more restructurings at companies, though some are holding off.
“I’m seeing a lot of ‘kick the can down the road’ behavior which isn’t that helpful. Do the hard things and don’t delay or procrastinate unless there is very good reason to. Things don’t often get easier in the future simply because you wish for them to,” Kanji told CNBC via email.
Wedbush’s Ives said that there could also be more collapses, adding that early stage tech startups with weaker hands could be forced to sell or shut down.
“The impact from this past week will have major ripple impacts across the tech landscape and Silicon Valley for years to come in our opinion,” Ives said in a note Sunday.
—CNBC’s Rohan Goswami and Ari Levy contributed to this report.
Meta CEO Mark Zuckerberg appears at the Meta Connect event in Menlo Park, California, on Sept. 25, 2024.
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Meta’s AI assistant now has 1 billion monthly active users across the company’s family of apps, CEO Mark Zuckerberg said Wednesday at the company’s annual shareholder meeting.
The “focus for this year is deepening the experience and making Meta AI the leading personal AI with an emphasis on personalization, voice conversations and entertainment,” Zuckerberg said.
The artificial intelligent assistant’s 1 billion milestone comes after the company in April released a standalone app for the tool.
The plan is for Meta to keep growing the product before building a business around it, Zuckerberg said on Wednesday. As Meta AI improves overtime, Zuckerberg said “there will be opportunities to either insert paid recommendations” or offer “a subscription service so that people can pay to use more compute.”
In February, CNBC reported that Meta was planning to debut a standalone Meta AI app during the second quarter and test a paid-subscription service akin to rival chat apps like OpenAI’s ChatGPT.
“It may seem kind of funny that a billion monthly actives doesn’t seem like it’s at scale for us, but that’s where we’re at,” Zuckerberg told shareholders.
During the Meta shareholder meeting, investors voted on 14 different items related to the company’s business, nine of which were shareholder proposals covering topics such as child safety, greenhouse gas emissions and a proposed bitcoin treasury assessment.
Shareholder proposal 8, for example, was submitted by JLens, which is an investment advisor and affiliate of the Anti-Defamation League, and called for Meta to prepare an annual report detailing and addressing hate content, including antisemitism, on its services following January policy changes that relaxed content-moderation guidelines.
Early voting results on Wednesday showed the proposals that Meta’s board did not recommend were unlikely to pass, including one calling for the company to end its dual-class share structure, which gives Zuckerberg significant voting power. Meanwhile, the voting items that the board favored, including those pertaining to approving the company’s board of director nominees and an equity incentive plan, were likely to pass, based on the preliminary results.
Meta said final polling results will be released within four business days on the company’s website and the U.S. Securities and Exchange Commission.
Salesforce CEO Marc Benioff participates in an interview at the World Economic Forum in Davos, Switzerland, on Jan. 22, 2025.
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Salesforce shares were volatile in extended trading on Wednesday after the sales and customer service software maker reported upbeat fiscal first-quarter results and guidance.
Here’s how the company performed relative to LSEG consensus:
- Earnings per share: $2.58 adjusted vs. 2.54 expected
- Revenue: $9.83 billion vs. $9.75 billion expected
Salesforce’s revenue grew 7.6% year over year in the quarter, which ended on April 30, according to a statement. Net income of $1.54 billion, or $1.59 per share, was basically flat compared with $1.53 billion, or $1.56 per share, a year ago.
President Donald Trump announced sweeping tariffs on goods imported into the U.S. in early April. Co-founder and CEO Marc Benioff sounded positive about the company’s results for the quarter anyway, pointing to its plan, announced on Tuesday, to buy data management company Informatica for $8 billion.
It would be Salesforce’s priciest acquisition since the $27.1 billion Slack deal in 2021. Slack marked the top end of the buyouts Salesforce had made under Benioff. Activist investors raised concerns about all the spending, in addition to slowing revenue growth.
Salesforce sprung into action, slashing 10% of its headcount. Benioff proclaimed that the board’s mergers and acquisitions committee had been disbanded. The company’s finance chief at the time said it would reach a margin expansion goal two years early. And Salesforce started paying dividends to shareholders.
Initial reception to the Informatica announcement was generally favorable. “Salesforce is paying a reasonable multiple for the asset, in our view, and the deal should be more easily digested by investors than some of the company’s large deals in the past (i.e. Slack),” Stifel analysts led by J. Parker Lane wrote in a note to clients. The investment bank has a buy rating on Salesforce shares.
During the fiscal first quarter, Salesforce introduced the AgentExchange marketplace for artificial intelligence agents.
Management sees $2.76 to $2.78 in adjusted earnings per share on $10.11 billion to $10.16 billion in revenue for the fiscal second quarter. Analysts polled by LSEG had expected $2.73 in adjusted earnings per share on $10.01 billion in revenue.
Salesforce bumped up its full-year forecast. It called for $11.27 to $11.33 in adjusted earnings per share and $41.0 billion to $41.3 billion in revenue, implying revenue growth between 8% and 9%. The LSEG consensus included net income of $11.16 per share and $40.82 billion in revenue. The guidance in February was $11.09 to $11.17 in adjusted earnings per share, with $40.5 billion to $40.9 billion in revenue.
As of Wednesday’s close, the stock had slipped about 18% so far in 2025, while the S&P index was unchanged.
Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.
This is breaking news. Please check back for updates.
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