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Investors Weigh In on SVB’s New Owner
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Good day. First Citizens BancShares Inc.’s acquisition of most of the deposits, loans and branches of failed Silicon Valley Bank removes some uncertainty around SVB’s future. But not all, venture investors say.
First Citizens, one of the nation’s largest regional banks, is looking forward to “building relationships with our new customers,” Chief Executive Frank Holding Jr. said Monday in a news release. Most of SVB’s depositors and borrowers are startups and their investors.
SVB’s customers no doubt will welcome a sense of stability after weeks of guesswork over the bank’s fate, especially after federal regulators froze multimillion-dollar accounts in the days following SVB’s sudden collapse on March 10.
And with more than $100 billion in assets as of Dec. 31, 2022, according to the Federal Reserve, First Citizens appears to have the capital resources to provide that stability—along with a five-year $35 billion loan and a $70 billion line of credit, both from the Federal Deposit Insurance Corp., as part of the acquisition deal.
Yet some investors, including many who have helped their portfolio startups move accounts from SVB, remain wary of how a traditional bank—First Citizens was founded in 1898—will handle the capital needs of startups whose only collateral are investors’ bets on their prospects for speedy growth.
“The news will be positive if First Citizens embraces the customer-first service aspect of SVB and maintains the same service level approach,” said Steven Rosenblatt, co-founder of Oceans Ventures, an investor in seed-stage companies. Mr. Rosenblatt said many banks are out of touch with the unique needs of pre-revenue startups. But at the very least, he said, the acquisition provides a “definitive outcome” after a cloudy few weeks.
Likewise, Jon Lehr, co-founder and general partner at venture-capital firm Work-Bench, said the move seems like a step in the right direction. “The open question we’ll be keeping an eye on is to what degree SVB will participate in startup lending under First Citizens,” Mr. Lehr said.
SVB was known for having a deep understanding of how startups are capitalized and operate from the earliest stages, said Will Robbins, general partner at Contrary, a venture investing firm.
“Other banks struggle to serve newly formed companies without credit history, and entrepreneurs or employees with illiquid but reliable personal assets,” Mr. Robbins said. But, overall, he said, the acquisition was good news for startups.
And now on to the news...
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The SVB purchase will give First Citizens a prominent banking presence in California and a wealth-management business in the Northeast. PHOTO: ELIJAH NOUVELAGE/BLOOMBERG NEWS
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First Citizens acquires much of failed Silicon Valley Bank. A fast-growing North Carolina lender with a history of buying failed banks is taking on its largest challenge yet with its purchase of Silicon Valley Bank, The Wall Street Journal reports. First Citizens BancShares Inc.’s acquisition of the bulk of SVB’s assets will effectively double the size of the 125-year-old lender, which for most of its history was controlled by one family and operated mainly in North Carolina.
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The Raleigh-based bank, which had $42 billion in assets three years ago, will have $219 billion after the SVB deal. It won an auction for SVB orchestrated by the Federal Deposit Insurance Corp.
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First Citizens isn’t known for technology banking, the bread-and-butter business of SVB, but its headquarters are at the center of a regional tech hub.
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$90 Billion
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The value of Silicon Valley Bank securities that will remain in receivership after the failed bank is taken over by First Citizens BancShares Inc., WSJ reports.
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Fed’s Barr Calls SVB a ‘Textbook Case of Mismanagement’
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The failure of Silicon Valley Bank demonstrates a “textbook case of mismanagement,” the Federal Reserve’s top banking regulator is expected to tell Senate lawmakers on Tuesday, while acknowledging there may have been shortcomings in the central bank’s oversight, WSJ reports. “SVB failed because the bank’s management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors,” said Michael Barr, the Fed’s vice chairman for supervision, in written testimony released by the central bank. Mr. Barr is leading a review of the Fed’s supervision of the firm, which is due by May.
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FTC Chair Lina Khan Vows to Protect Competition in AI Market
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FTC Chair Lina Khan on Monday said her agency would protect competition in the nascent market for artificial-intelligence tools, warning that big-tech companies could “start to panic” and try to block new entrants through unlawful tactics, WSJ reports. Speaking at an antitrust conference, Ms. Khan said the Federal Trade Commission would be watching to ensure startups can compete in the AI industry.
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'As you have machine learning that depends on huge amounts of data and also depends on huge amounts of storage, we need to be very vigilant to make sure that this is not just another site for the big companies becoming bigger and really squelching rivals.'
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— FTC Chair Lina Khan on Monday
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Binance Sued by CFTC Over Evading U.S. Rules
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U.S. regulators on Monday sued Binance Holdings Ltd., alleging the operator of the world’s largest cryptocurrency exchange kept an illegal foothold in the American market and violated rules designed to prevent illicit financial activity, WSJ reports. The lawsuit sets up a battle between the Commodity Futures Trading Commission, one of the U.S.’s smallest financial regulators, and a global company whose chief executive, Changpeng Zhao, is one of the industry’s most influential figures. Binance has survived, and grown, even as many other crypto companies have gone bankrupt over the past year.
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In a statement, Mr. Zhao said the CFTC complaint is “unexpected and disappointing,” adding that Binance has been “working cooperatively with the CFTC for more than two years.”
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Funds
Business software-focused OpenView Venture Partners closed its seventh fund at $570 million, which is 25% larger than the firm’s sixth fund. Founded in 2006, Boston-based OpenView now has $2.4 billion in total assets under management.
Biotechnology investor SR One closed its second fund since spinning out from GlaxoSmithKline in 2020. With $600 million in commitments, the new vehicle exceeded its original target of $500 million, and brings the firm’s total amount under management to more than $1.5 billion.
People
Greylock Partners said Jacob Andreou is joining the firm as a general partner to focus on consumer investing. He was previously at Snap.
Hazel Technologies Inc., a startup focused on extending the shelf life of fresh produce and reducing food waste, promoted Parker Booth to chief executive and appointed Jeff Leshuk as chief revenue officer. Before the promotion, Mr. Booth had been chief operating officer at Hazel since 2019. Mr. Leshuk previously ran consulting firm Strategic Fresh LLC and co-founded Carrisan Technologies.
Exits
J.P. Morgan agreed to acquire Aumni, a provider of investment analytics software to the venture-capital industry, for an undisclosed amount.
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Kredivo Holdings, a digital financial services platform serving Southeast Asia, scored about $270 million in Series D funding from venture-capital firms including Square Peg Capital and Openspace Ventures. Kredivo was formerly known as FinAccel.
GT Medical Technologies Inc., a medical device startup focused on improving the lives of patients with brain tumors, raised $45 million in Series C funding led by Gilde Healthcare.
Labviva Inc., a Boston-based life sciences digital marketplace, secured $20 million in Series A financing. Biospring Partners led the round, with Managing Partner Jennifer Lum joining the company’s board.
StellarFi, an Austin, Texas-based provider of credit-building tools, landed $15 million in Series A funding led by Acrew Capital.
FedML, a Sunnyvale, Calif.-based collaborative artificial intelligence startup, picked up $6 million in combined pre-seed and seed funding rounds led by Camford Capital.
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Microsoft CEO Satya Nadella discussed ChatGPT integration for the Bing search engine last month.
PHOTO: JASON REDMOND/AGENCE FRANCE-PRESSE/GETTY IMAGES
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