Thiel funds, venture firms advise companies to withdraw money from SVB

(Bloomberg) — Peter Thiel’s Founders Fund and several other high-profile venture capital firms on Thursday advised their portfolio companies to withdraw money from Silicon Valley Bank in response to panic over the bank’s financial health in tech startup circles.

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Founders Fund, a prominent VC firm co-founded by billionaire Thiel, has asked its companies to move their funds, according to a person familiar with the matter, who asked not to be identified to discuss private information.

Coatue Management, Union Square Ventures and Founder Collective advised their portfolio companies to withdraw their money from the bank, people familiar with the matter said. Canaan, another big VC firm, has asked its portfolio companies to withdraw their cash as needed, according to another person.

Greg Becker, chief executive officer of SVB Financial Group, held a conference call Thursday advising customers of SVB-owned Silicon Valley Bank to “stay calm” amid concerns about the bank’s financial health, according to one with the matter familiar person.

Representatives from Founders Fund, Coatue and Union Square Ventures declined to comment. A Silicon Valley Bank representative did not immediately respond to a request for comment. Canaan and Founder Collective representatives did not immediately respond to requests for comment.

Becker conducted the approximately 10-minute call with investors around 11:30 a.m. local time San Francisco. He asked the bank’s clients, including venture capital investors, to support the bank the way it has supported its clients for the past 40 years, the person said.

Worries about the lender shot through Silicon Valley on Thursday. There’s “a lot of panic,” said Jenny Fielding, a managing partner at The Fund, which invests in early-stage companies. Fielding said she is closely monitoring the situation with the bank and has not yet advised her portfolio companies on how to proceed.

Garry Tan, the President and CEO of Y Combinator, warned his network of startups that solvency risk was real and implied that they should consider limiting their exposure to the lender. “We have no precise knowledge of what is going on at SVB,” Tan wrote in a post viewed by Bloomberg News. “But whenever you hear problems with a bank’s solvency and it can be considered credible, you should take it seriously and prioritize your startup’s interests by not exposing yourself there to more than $250,000.” He added: “Your startup dies if you run out of money for any reason.”

Venture firm Tribe Capital has also advised its portfolio companies to withdraw some, if not all, of their balances from the SVB. “It’s important to understand that all banks are leveraged and use deposits, so by the time everyone moves, every bank with a business model is dead by definition,” Tribe co-founder Arjun Sethi said in a Bloomberg-verified note to portfolio companies. “Because the risk isn’t zero and the cost is small, it’s better to diversify your risk, if not all,” he added.

Another firm, Activant Capital, sent emails and texts to the CEOs of its portfolio companies, encouraging them to transfer their SVB balances to other lenders and helping some transfer capital to First Republic Bank, CEO Steve Sarracino said.

Fear spread after Santa Clara, Calif.-based SVB announced on Wednesday that it had closed a $2.25 billion stock sale following a significant loss in its portfolio, which included U.S. Treasuries and mortgage-backed securities.

In an email signed Thursday morning by Mark Lau, head of Silicon Valley Bank’s venture practice, SVB said it received questions about the 8-K from many of its clients over the course of 24 hours, according to the content. The company’s filings on Wednesday had heard the email about the conference call verified by Bloomberg.

SVB shares fell as much as 60% at the close on Thursday, hitting their lowest level since September 2016. Becker’s call was previously reported by The Information. The stock continued to fall in late trading.

Read more: SVB falls the most since records began as startup clients face liquidity squeezes

Some VCs said they stand by the bank. Investor Keval Desai, founder of Shakti, said not only did he not tell his portfolio companies to withdraw money, but he placed a buy order for the bank’s shares today with a limit of $101.

“I’m not Warren Buffett,” Desai said, cautioning that he doesn’t provide investment advice. “But I think this is a buying opportunity.”

A prominent investor, Mark Suster, warned companies not to overreact to news about the bank. “I believe your CEO when he says you’re solvent,” Suster wrote, “and not violating any bank codes.”

Dan Scheinman, an investor who has backed companies like Zoom Video Communications Inc., said he took calls from two early-stage companies in his portfolio on Thursday, wondering if they should close their accounts with the bank. He advised them to get more information before taking any action.

“What do we know about banks you would switch to? Are they in better or worse shape?” he said, he guessed. “It’s painful to switch, but it’s even more painful when the bank collapses.”

An email thread involving more than 1,000 Andreessen Horowitz founders was packed with news Thursday, with many encouraging each other to withdraw cash from the bank. At one point in the thread, general partner David George intervened. “Hi everyone,” he wrote in a Bloomberg-verified post. “We know you have questions about how the SVB situation is being handled. We recommend that you pick up the phone and call your GP. Thank you DG.”

A similar thread circulates among CFOs of large startups, said a partner at a large venture firm.

In the threads, many startup founders and executives worried about how a collapse of SVB would affect Silicon Valley’s infrastructure. The bank could seek to liquidate its stakes in portfolio companies, further driving down the already weak valuations of many startups. These lower valuations, in turn, would further weaken the balance sheets of other banks, hedge funds and crossover funds holding the same assets.

–Assisted by Priya Anand and Lizette Chapman.

(Updates from the third paragraph.)

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