1 00:00:02,400 --> 00:00:06,640 Speaker 1: Welcome to zero. I'm Kshatrati. This week the collapse of 2 00:00:06,720 --> 00:00:22,120 Speaker 1: a climate bank. Just over a week ago, Silicon Valley 3 00:00:22,120 --> 00:00:26,160 Speaker 1: Bank or SVB had a sterling reputation as a climate bank. 4 00:00:26,680 --> 00:00:30,200 Speaker 1: It served more than fifteen hundred companies doing sustainability work, 5 00:00:30,520 --> 00:00:35,000 Speaker 1: which included everything from small innovative climate startups to mid 6 00:00:35,080 --> 00:00:38,720 Speaker 1: size solo projects. It was a bank built around working 7 00:00:38,720 --> 00:00:43,199 Speaker 1: with young companies pursuing big ideas. Late last week, the 8 00:00:43,320 --> 00:00:47,080 Speaker 1: bank collapsed yesterday. SBB says that they are trying to 9 00:00:47,159 --> 00:00:51,680 Speaker 1: raise more capital. There are recent developments the concern a 10 00:00:51,680 --> 00:00:54,760 Speaker 1: few banks, and you have people like Peter Thor advising 11 00:00:54,800 --> 00:00:56,960 Speaker 1: clients to pull money out. You get that run on 12 00:00:57,000 --> 00:01:00,840 Speaker 1: the banks. The government regulator and charge, the FDIC, took 13 00:01:00,840 --> 00:01:03,600 Speaker 1: control of Silicon Valley Banks as sets as the president. 14 00:01:03,640 --> 00:01:05,800 Speaker 1: What do you know right now about why this happened. 15 00:01:06,440 --> 00:01:08,600 Speaker 1: It started with a worry among a small group of 16 00:01:08,680 --> 00:01:12,080 Speaker 1: venture capitalists and startups that the bank was running shot 17 00:01:12,160 --> 00:01:15,800 Speaker 1: on cash. That snowball into a bank run, and within 18 00:01:15,920 --> 00:01:19,360 Speaker 1: hours the bank's customers had tried to withdraw forty two 19 00:01:19,440 --> 00:01:23,160 Speaker 1: billion dollars, about a fifth of the bank's holdings. The 20 00:01:23,280 --> 00:01:26,679 Speaker 1: shortage of cash became so severe that the bank seized 21 00:01:26,720 --> 00:01:30,160 Speaker 1: normal operations and was taken over by US regulators to 22 00:01:30,240 --> 00:01:34,200 Speaker 1: limit the damage. The very next day, startups began to 23 00:01:34,200 --> 00:01:36,800 Speaker 1: worry about how they would pay their staff the following week, 24 00:01:37,280 --> 00:01:40,240 Speaker 1: and venture capitalists worked through the weekend to stump up 25 00:01:40,280 --> 00:01:44,080 Speaker 1: emergency cash. Relief came in the form of US regulators 26 00:01:44,080 --> 00:01:47,400 Speaker 1: promising that all deposits will be safe, and on Monday, 27 00:01:47,800 --> 00:01:51,320 Speaker 1: startups could breathe easy as they could access their cash again. 28 00:01:52,080 --> 00:01:55,440 Speaker 1: But the headache is far from over, particularly for climate 29 00:01:55,480 --> 00:01:59,040 Speaker 1: tech companies that are readying themselves for explosive growth and 30 00:01:59,160 --> 00:02:02,760 Speaker 1: need cops of cash. Climate tech has been a bright 31 00:02:02,800 --> 00:02:06,400 Speaker 1: spot in the last year. While total venture capital investments 32 00:02:06,440 --> 00:02:10,720 Speaker 1: in twenty twenty two fell, investments in climate tech actually increased, 33 00:02:11,000 --> 00:02:14,359 Speaker 1: reaching almost sixty billion dollars. According to Bloomberg an EF. 34 00:02:15,000 --> 00:02:18,040 Speaker 1: One way to understand the SBB debacle is to experience 35 00:02:18,080 --> 00:02:21,040 Speaker 1: it through the eyes of a startup founder, and so 36 00:02:21,160 --> 00:02:24,520 Speaker 1: I spoke with Austin Sendek, the CEO of Ionics, to 37 00:02:24,720 --> 00:02:28,919 Speaker 1: hear how the bank's collapse pile stress onto his fledgling company. 38 00:02:28,960 --> 00:02:31,359 Speaker 1: But first to set the scene, I asked my colleague 39 00:02:31,400 --> 00:02:39,840 Speaker 1: Mark Bourgen to give us the Big Picture view Mark. 40 00:02:39,880 --> 00:02:42,160 Speaker 1: Welcome to the show, Thanks for having me, and welcome 41 00:02:42,160 --> 00:02:45,480 Speaker 1: to London. You've just left San Francisco and you now 42 00:02:45,639 --> 00:02:48,919 Speaker 1: cover the tech beat here in London. Of course, climate 43 00:02:48,960 --> 00:02:51,399 Speaker 1: tech is something you've been writing about for some time 44 00:02:51,440 --> 00:02:54,480 Speaker 1: and you will continue. But what a wreck have you 45 00:02:54,560 --> 00:02:56,960 Speaker 1: left behind? It seems like I got out just in time. 46 00:02:57,320 --> 00:02:58,960 Speaker 1: You know. It's funny. We had a story Tuesday night 47 00:02:59,000 --> 00:03:01,160 Speaker 1: from our UK team about how they're preparing the budget 48 00:03:01,400 --> 00:03:03,840 Speaker 1: here in the UK, and they were frantically trying to 49 00:03:03,880 --> 00:03:07,600 Speaker 1: scrub the terms Silicon Valley from the talk. It just 50 00:03:08,000 --> 00:03:11,320 Speaker 1: speaks volumes about maybe this place that was shorthand for 51 00:03:11,440 --> 00:03:16,040 Speaker 1: innovation and an entrepreneurship and phenomenal success might mean something 52 00:03:16,280 --> 00:03:19,440 Speaker 1: very different. Now, let's just start with the basics. What 53 00:03:19,680 --> 00:03:23,240 Speaker 1: is Silicon Valley Bank. So Silicon Valley Bank they rebranded 54 00:03:23,280 --> 00:03:27,119 Speaker 1: the SVB was started in eighty three, which I forty 55 00:03:27,200 --> 00:03:29,960 Speaker 1: years ago, because it's like this niche and really took 56 00:03:29,960 --> 00:03:33,200 Speaker 1: off I think in the past twenty years. Something that 57 00:03:33,200 --> 00:03:36,920 Speaker 1: would service the area around northern California right that sector, 58 00:03:37,280 --> 00:03:40,160 Speaker 1: the software industry, or a reliable place where a company 59 00:03:40,440 --> 00:03:43,200 Speaker 1: just getting off the ground typically turned to their investors 60 00:03:43,200 --> 00:03:45,000 Speaker 1: and asked, you know, how do we set up payroll? 61 00:03:45,360 --> 00:03:47,640 Speaker 1: How do we set up a bank? And they would 62 00:03:47,680 --> 00:03:50,760 Speaker 1: direct him to SVB, which became not just a commercial bank, 63 00:03:50,800 --> 00:03:53,200 Speaker 1: but put far more in the tech sector. They started 64 00:03:53,240 --> 00:03:57,080 Speaker 1: to become a lender themselves. They dipped into providing mortgages. 65 00:03:57,160 --> 00:03:59,840 Speaker 1: They haven't gotten too wineries I learned we learned about 66 00:04:00,200 --> 00:04:02,600 Speaker 1: this past weekend, So I think more than a bank, 67 00:04:02,640 --> 00:04:06,680 Speaker 1: they'd really positioned themselves a sort of integral part of 68 00:04:06,960 --> 00:04:10,360 Speaker 1: the tech world. I mean there was a partner, Sequoia Capital, 69 00:04:10,560 --> 00:04:13,080 Speaker 1: its big venture capital firms that equated over the weekend. 70 00:04:13,080 --> 00:04:15,640 Speaker 1: They're they're collapsed to a death in the family. And 71 00:04:15,800 --> 00:04:20,040 Speaker 1: what specifically did it do for climate tech startups? So 72 00:04:20,240 --> 00:04:23,520 Speaker 1: SBB had focused on climate tech recently as scenario of growth, 73 00:04:24,000 --> 00:04:26,520 Speaker 1: which is very true when especially in the past couple 74 00:04:26,480 --> 00:04:28,600 Speaker 1: of years, where a lot of other sectors were we're 75 00:04:28,640 --> 00:04:31,239 Speaker 1: falling behind. So I think in addition to their commercial banking, 76 00:04:31,279 --> 00:04:32,880 Speaker 1: so if a startup comes to them and they just 77 00:04:32,920 --> 00:04:35,200 Speaker 1: want to park their money and use them as their 78 00:04:35,200 --> 00:04:37,640 Speaker 1: primary bank, they also provide a lot of what's called 79 00:04:37,720 --> 00:04:40,600 Speaker 1: venture debt, which is a way of financing a company 80 00:04:40,720 --> 00:04:42,720 Speaker 1: sort of different than like what you'd say, if a 81 00:04:42,800 --> 00:04:45,400 Speaker 1: venture capitalist gives you money, there is an equity round. 82 00:04:45,480 --> 00:04:48,400 Speaker 1: They own a part portion of your company. Venture debt 83 00:04:48,680 --> 00:04:50,560 Speaker 1: is basically a loan. It could be like a very 84 00:04:51,080 --> 00:04:54,000 Speaker 1: low interest rate loan, and it's something for companies that 85 00:04:54,240 --> 00:04:56,400 Speaker 1: a lot of startups are are moving pretty quickly. They 86 00:04:56,400 --> 00:04:58,680 Speaker 1: don't have a lot of cash coming in. Often they're 87 00:04:58,720 --> 00:05:01,000 Speaker 1: not they're losing a lot of money. But what they 88 00:05:01,080 --> 00:05:05,120 Speaker 1: do need is a lot of capital upfront. And climate companies, 89 00:05:05,240 --> 00:05:09,039 Speaker 1: particularly ones that are working with hardware batteries trying to 90 00:05:09,080 --> 00:05:13,039 Speaker 1: build something like research intensive, they need a lot of 91 00:05:13,080 --> 00:05:16,360 Speaker 1: upprop capital with really nothing coming in. And you know, 92 00:05:16,440 --> 00:05:19,080 Speaker 1: they also advertised that they had more than fifteen hundred 93 00:05:19,080 --> 00:05:22,680 Speaker 1: companies that were climate startups that were their customers. We 94 00:05:22,760 --> 00:05:26,080 Speaker 1: understand that they also underwrote a lot of solar projects 95 00:05:26,200 --> 00:05:29,200 Speaker 1: because solar was a big booming industry in the last 96 00:05:29,200 --> 00:05:32,400 Speaker 1: twenty years. And then they did these other things which 97 00:05:32,440 --> 00:05:34,880 Speaker 1: we don't think about. Typically, if you are a startup 98 00:05:34,920 --> 00:05:36,760 Speaker 1: and you have one hundred million dollars sitting in the 99 00:05:36,800 --> 00:05:41,000 Speaker 1: bank account with inflation, that money is actually losing its values, 100 00:05:41,080 --> 00:05:43,760 Speaker 1: So you want some interest to be generated on that 101 00:05:43,800 --> 00:05:46,760 Speaker 1: and they provided for what it's called a money market account, 102 00:05:46,760 --> 00:05:49,880 Speaker 1: where that account actually gave you a higher interest rate 103 00:05:49,960 --> 00:05:52,880 Speaker 1: just for the money sitting in that bank. So now 104 00:05:52,920 --> 00:05:55,720 Speaker 1: we know that the bank has collapsed and the US 105 00:05:55,760 --> 00:05:58,760 Speaker 1: government is figuring out a way to deal with what 106 00:05:58,839 --> 00:06:02,560 Speaker 1: happens next. But what actually went wrong? Why did it collapse? 107 00:06:02,839 --> 00:06:06,719 Speaker 1: I mean, it happened incredibly quickly, and for some people 108 00:06:06,760 --> 00:06:09,160 Speaker 1: that learned about Silicon Valley Bank on Thursday and then 109 00:06:09,160 --> 00:06:11,240 Speaker 1: a day later it was gone. My understanding is that 110 00:06:11,360 --> 00:06:13,880 Speaker 1: in the past several years, Silicon Valley Bank operated with 111 00:06:13,880 --> 00:06:16,880 Speaker 1: this low interest rate environment, and because they banked with 112 00:06:16,920 --> 00:06:20,000 Speaker 1: a tech sector, it's different than a lot of traditional banks, 113 00:06:20,040 --> 00:06:22,480 Speaker 1: in part because a lot of the customers didn't need 114 00:06:22,560 --> 00:06:25,800 Speaker 1: loans because they were getting tons of venture capital coming 115 00:06:25,839 --> 00:06:28,480 Speaker 1: in like that wasn't the problem, and so they would 116 00:06:28,480 --> 00:06:31,360 Speaker 1: park their money with SBB. What SBB did was they 117 00:06:31,440 --> 00:06:34,920 Speaker 1: bought a lot of long term bonds and some mortgage 118 00:06:34,920 --> 00:06:36,919 Speaker 1: backed securities, those things that were sort of familiar for 119 00:06:37,040 --> 00:06:40,839 Speaker 1: us from the housing crisis, These assets that looked really 120 00:06:40,880 --> 00:06:43,480 Speaker 1: good and were very good on paper when interest rates 121 00:06:43,520 --> 00:06:45,719 Speaker 1: were low. And then when happened was a fed because 122 00:06:45,720 --> 00:06:49,360 Speaker 1: of inflation in the US started to increase interest rates 123 00:06:49,400 --> 00:06:53,120 Speaker 1: that no longer looked like a great financial bet. Last week, 124 00:06:53,279 --> 00:06:55,960 Speaker 1: SPB put out an announcement that they were going to 125 00:06:56,000 --> 00:06:59,240 Speaker 1: recapitalize and how to restructure their balance sheet. They need 126 00:06:59,240 --> 00:07:01,719 Speaker 1: to raise more money because their financial position had changed. 127 00:07:02,279 --> 00:07:06,160 Speaker 1: It's just something that the companies didn't really anticipate any 128 00:07:06,200 --> 00:07:10,240 Speaker 1: immediate backlash, certainly something that we saw, and so there 129 00:07:10,240 --> 00:07:15,320 Speaker 1: were companies venture capitalists that had both their money with SVB, 130 00:07:15,440 --> 00:07:17,840 Speaker 1: but then a lot of their portfolio companies and started 131 00:07:17,840 --> 00:07:20,000 Speaker 1: to advise our companies to maybe should pull out this 132 00:07:20,160 --> 00:07:22,320 Speaker 1: no longer looks like a safe place to bank. It 133 00:07:22,440 --> 00:07:26,360 Speaker 1: happened very rapidly, where one investor went, the next, and 134 00:07:26,560 --> 00:07:29,840 Speaker 1: the next their stock started to fall. I think that 135 00:07:29,920 --> 00:07:32,080 Speaker 1: coincided with a lot of companies either pulling out their 136 00:07:32,080 --> 00:07:34,600 Speaker 1: deposits or then trying to pull out their deposits discovering 137 00:07:34,640 --> 00:07:37,920 Speaker 1: that they couldn't, and that just became the snowball effect 138 00:07:37,960 --> 00:07:41,480 Speaker 1: where within a day they no longer existed. Now that's 139 00:07:41,480 --> 00:07:44,240 Speaker 1: called a classic bank run right banking one oh one, 140 00:07:44,320 --> 00:07:48,040 Speaker 1: which is you think when you have money in your 141 00:07:48,080 --> 00:07:50,800 Speaker 1: account under your name in a bank, you can always 142 00:07:50,800 --> 00:07:54,000 Speaker 1: go to the bank and get it. Well, technically, yes, 143 00:07:54,240 --> 00:07:58,960 Speaker 1: if the bank has that cash available, and ninety nine 144 00:08:00,200 --> 00:08:03,200 Speaker 1: of the time they do. But when everybody wants their 145 00:08:03,240 --> 00:08:05,520 Speaker 1: cash at the same time, that is when a bank 146 00:08:05,560 --> 00:08:09,200 Speaker 1: run happens, because that cash is actually not sitting in 147 00:08:09,240 --> 00:08:12,880 Speaker 1: an account untouched. It's being put to work so that 148 00:08:13,080 --> 00:08:15,360 Speaker 1: the bank can make some money and then provide the 149 00:08:15,360 --> 00:08:18,680 Speaker 1: services which you are getting for free. And as we 150 00:08:18,800 --> 00:08:22,800 Speaker 1: learned on Thursday, something like forty billion dollars was withdrawn 151 00:08:23,120 --> 00:08:26,880 Speaker 1: or requested from Silicon Valley Bank, which had about two 152 00:08:27,240 --> 00:08:30,240 Speaker 1: and twenty billion dollars of assets. That's a huge amount 153 00:08:30,280 --> 00:08:33,599 Speaker 1: of money to be in cashed really quickly. There's a 154 00:08:33,640 --> 00:08:36,760 Speaker 1: really good Simpsons episode where Bart Simpson, if you recall, 155 00:08:37,480 --> 00:08:39,640 Speaker 1: demonstrates what a bank run is right where he tells 156 00:08:39,640 --> 00:08:41,920 Speaker 1: everyone waiting in line that the money is going to 157 00:08:41,960 --> 00:08:43,640 Speaker 1: disappear and they have to pull it out. Now, what 158 00:08:43,720 --> 00:08:46,520 Speaker 1: do you mean the breakers out of money in servent 159 00:08:46,920 --> 00:08:51,239 Speaker 1: you only have enough cash for the next three customers 160 00:08:55,000 --> 00:08:58,040 Speaker 1: just second here, And that's basically what happened. Like people 161 00:08:58,320 --> 00:09:01,320 Speaker 1: went to SVB to pull all their money, they discovered 162 00:09:01,320 --> 00:09:07,000 Speaker 1: they couldn't, and that just caused mass panic. EONIX is 163 00:09:07,000 --> 00:09:10,640 Speaker 1: a climate startup using artificial intelligence to search for new 164 00:09:10,640 --> 00:09:14,520 Speaker 1: battery materials. What the company does could make future batteries cheaper, 165 00:09:14,840 --> 00:09:18,040 Speaker 1: something the world really needs. The company has raised around 166 00:09:18,080 --> 00:09:21,400 Speaker 1: three million dollars, of which a big chunk was in SVB. 167 00:09:22,360 --> 00:09:25,320 Speaker 1: I caught up with Eonix CEO Austin Sendec on Monday 168 00:09:25,320 --> 00:09:28,920 Speaker 1: evening to find out how svb's collapse has affected him 169 00:09:29,080 --> 00:09:34,480 Speaker 1: and his company. Now, before I call it the most 170 00:09:34,480 --> 00:09:37,440 Speaker 1: stressful week, what was the stress level for you? Like, 171 00:09:37,600 --> 00:09:40,640 Speaker 1: out of ten? Probably at ten? Okay, so one of 172 00:09:40,679 --> 00:09:43,120 Speaker 1: the most stressful weeks in your life, I'll just say that. Yeah. 173 00:09:43,440 --> 00:09:46,160 Speaker 1: So a company in your position, which is just about 174 00:09:46,240 --> 00:09:50,000 Speaker 1: to get started hire people, is going to need money. 175 00:09:50,559 --> 00:09:53,840 Speaker 1: And over the past week, we've seen the collapse of 176 00:09:54,040 --> 00:09:56,880 Speaker 1: Silicon Valley Bank, and you were a customer of the bank, 177 00:09:57,520 --> 00:09:59,800 Speaker 1: and what transpired ended up being one of the most 178 00:10:00,040 --> 00:10:02,400 Speaker 1: us full of weeks of your life. What happened, Well, 179 00:10:02,440 --> 00:10:04,080 Speaker 1: I think we're all still trying to figure that out. 180 00:10:04,160 --> 00:10:07,960 Speaker 1: But it was a weekend of uncertainty. So Thursday morning, 181 00:10:08,160 --> 00:10:10,880 Speaker 1: I woke up to some news that there were questions 182 00:10:10,880 --> 00:10:15,280 Speaker 1: and concerns about Silicon Valley Bank, and I actually texted 183 00:10:15,320 --> 00:10:18,600 Speaker 1: my co founder and said he might have asked me first. 184 00:10:18,600 --> 00:10:20,920 Speaker 1: He said, you know, is this a problem? And I 185 00:10:20,960 --> 00:10:24,840 Speaker 1: remember saying, Hey, I don't think Silicon Valley Bank's going anywhere, right, 186 00:10:24,880 --> 00:10:28,160 Speaker 1: This bank's been around for forty years. And just within 187 00:10:28,200 --> 00:10:32,079 Speaker 1: a couple hours, after all kinds of texts and emails, 188 00:10:32,120 --> 00:10:36,440 Speaker 1: they're that really morphed into some pretty serious concern and 189 00:10:37,040 --> 00:10:39,679 Speaker 1: the calculation really went from hey, you know this is 190 00:10:39,720 --> 00:10:42,000 Speaker 1: just some online chatter too, it really sounds like the 191 00:10:42,120 --> 00:10:44,559 Speaker 1: bank's in trouble. So by the end of the day Thursday, 192 00:10:44,600 --> 00:10:48,760 Speaker 1: we made the determination to withdraw our money. But unfortunately, 193 00:10:48,840 --> 00:10:51,480 Speaker 1: like many others, we were too late. How much money 194 00:10:51,480 --> 00:10:54,080 Speaker 1: did you have in the bank. I won't say exactly 195 00:10:54,120 --> 00:10:55,439 Speaker 1: how much money we had in the bank, but I 196 00:10:55,480 --> 00:10:59,840 Speaker 1: will say that we were over the FDIC insured limit, 197 00:11:00,080 --> 00:11:03,559 Speaker 1: so there was uninsured deposits there in the bank. FDIC 198 00:11:04,120 --> 00:11:08,080 Speaker 1: is a Federal deposit insurance corporation created in nineteen thirty 199 00:11:08,160 --> 00:11:12,280 Speaker 1: three after the Great Depression. Today, it guarantees deposits up 200 00:11:12,280 --> 00:11:15,040 Speaker 1: to two hundred and fifty thousand dollars. Anything above that 201 00:11:15,120 --> 00:11:18,800 Speaker 1: amount is uninsured. That means there's no guarantee it will 202 00:11:18,840 --> 00:11:22,000 Speaker 1: be returned if you have a million dollars in the bank, Well, 203 00:11:22,080 --> 00:11:25,080 Speaker 1: lucky you. But if the bank goes under, you could 204 00:11:25,120 --> 00:11:27,920 Speaker 1: lose seven hundred and fifty thousand dollars. If you have 205 00:11:28,080 --> 00:11:32,280 Speaker 1: ten million dollars, well you get the picture. And say 206 00:11:32,440 --> 00:11:34,559 Speaker 1: he had lost the money, what would have happened to 207 00:11:34,679 --> 00:11:37,800 Speaker 1: you as a company. Well, you know, we're small and 208 00:11:37,840 --> 00:11:41,480 Speaker 1: we're early and that would have been a really severe impact. 209 00:11:41,640 --> 00:11:45,720 Speaker 1: We had money across institutions. We had money to continue 210 00:11:45,760 --> 00:11:48,880 Speaker 1: to fund our operations, so that made us relatively fortunate. 211 00:11:48,880 --> 00:11:50,800 Speaker 1: I know that there were other entrepreneurs in early stage 212 00:11:50,800 --> 00:11:52,880 Speaker 1: companies who didn't know if they could make payroll on Monday. 213 00:11:53,360 --> 00:11:55,400 Speaker 1: So we knew that we could. But the long term 214 00:11:55,480 --> 00:11:58,760 Speaker 1: outlook if that money had disappeared would have been pretty bleak. 215 00:11:59,040 --> 00:12:01,560 Speaker 1: And so when you learn a problem on Thursday morning, 216 00:12:01,559 --> 00:12:05,199 Speaker 1: you're like, well, online chatter, maybe this is something when 217 00:12:05,200 --> 00:12:07,520 Speaker 1: you should think about, You think about it, you talk 218 00:12:07,559 --> 00:12:09,760 Speaker 1: a little more in your life. Oh, maybe there's a 219 00:12:09,760 --> 00:12:12,600 Speaker 1: real problem, and so you try to take your money out. 220 00:12:12,880 --> 00:12:15,280 Speaker 1: What happens when you try to do it. I think 221 00:12:15,320 --> 00:12:17,640 Speaker 1: one of the interesting things that will remember from this 222 00:12:17,679 --> 00:12:21,440 Speaker 1: incident is that this was probably the first bank run 223 00:12:21,520 --> 00:12:24,480 Speaker 1: in the era of virtual banking, right, so no one's 224 00:12:24,520 --> 00:12:26,160 Speaker 1: waiting in line to pull their money out of the bank. 225 00:12:26,240 --> 00:12:29,000 Speaker 1: People are logging in and wiring money out within a minute. 226 00:12:29,080 --> 00:12:32,960 Speaker 1: So this is happening very quickly. And Thursday afternoon there's 227 00:12:33,000 --> 00:12:36,000 Speaker 1: a brief moment where there's a really serious discussion that 228 00:12:36,000 --> 00:12:38,760 Speaker 1: we're having internally, which is there's some advice that we 229 00:12:38,760 --> 00:12:41,440 Speaker 1: should pull the money out, but there's this sort of 230 00:12:41,440 --> 00:12:44,640 Speaker 1: ethical consideration, which is, you want to support the bank. 231 00:12:45,000 --> 00:12:47,599 Speaker 1: Silicon Valley Bank has been a pillar of the technology 232 00:12:47,640 --> 00:12:49,600 Speaker 1: industry and really of the entire Bay area for a 233 00:12:49,600 --> 00:12:52,120 Speaker 1: long time, and so there's you know, you don't want 234 00:12:52,120 --> 00:12:54,560 Speaker 1: to sort of leave the bank there. But then there's 235 00:12:54,559 --> 00:12:57,000 Speaker 1: this very serious concern of, hey, if this does happen, 236 00:12:57,360 --> 00:13:00,439 Speaker 1: if the bank does collapse, you don't want to have 237 00:13:00,440 --> 00:13:02,160 Speaker 1: our money stuck in there. And it was a little 238 00:13:02,160 --> 00:13:04,559 Speaker 1: bit sort of prisoner's dilemma, right, You're trying to game 239 00:13:04,600 --> 00:13:07,120 Speaker 1: theory your way through this, and at the end of 240 00:13:07,160 --> 00:13:10,840 Speaker 1: the day, my obligation as CEO of the company is 241 00:13:10,880 --> 00:13:13,240 Speaker 1: to our shareholders and to protect our shareholders. And so 242 00:13:13,600 --> 00:13:17,079 Speaker 1: unfortunately that led to the very difficult determination that we 243 00:13:17,400 --> 00:13:19,480 Speaker 1: should really get our money out of here before it's 244 00:13:19,520 --> 00:13:24,280 Speaker 1: too late. By the time we processed a wire transfer 245 00:13:24,280 --> 00:13:28,120 Speaker 1: out of the bank or tried, that was some time 246 00:13:28,160 --> 00:13:32,960 Speaker 1: around four o'clock Pacific, and so that's after basically the 247 00:13:33,000 --> 00:13:35,720 Speaker 1: markets had closed that day. We assumed that it would 248 00:13:35,720 --> 00:13:39,000 Speaker 1: go through first thing Friday morning. The bank went into 249 00:13:39,040 --> 00:13:41,840 Speaker 1: receivership around noon the following day, and that wire basically 250 00:13:41,880 --> 00:13:44,320 Speaker 1: never made it out. So you prepare a wire and 251 00:13:44,400 --> 00:13:47,160 Speaker 1: it doesn't go through, that means your money is stuck. 252 00:13:47,960 --> 00:13:51,000 Speaker 1: What was going through your mind when that happened. So 253 00:13:51,040 --> 00:13:53,360 Speaker 1: we didn't really know that the wire was not going 254 00:13:53,400 --> 00:13:59,360 Speaker 1: through until Friday. When it doesn't go through, I think suddenly, Okay, 255 00:13:59,440 --> 00:14:01,880 Speaker 1: how much money do we have access to? But more importantly, 256 00:14:02,559 --> 00:14:06,640 Speaker 1: everyone started getting very familiar with the FDIC and the 257 00:14:07,040 --> 00:14:10,559 Speaker 1: process of liquidating banks and speculating on you know, is 258 00:14:10,559 --> 00:14:12,640 Speaker 1: it eighty cents on the dollar, is it ninety cents 259 00:14:12,640 --> 00:14:14,400 Speaker 1: on the dollar? Is it ten cents on the dollar? 260 00:14:14,920 --> 00:14:18,280 Speaker 1: The outcomes could go so many different ways that you 261 00:14:18,320 --> 00:14:23,880 Speaker 1: almost don't want to speculate. FDIC, the Federal Deposit Insurance Corporation. 262 00:14:24,560 --> 00:14:27,440 Speaker 1: Did you know this thing existed before last week happened? 263 00:14:28,040 --> 00:14:30,400 Speaker 1: I did know about the work of the FDIC and 264 00:14:30,480 --> 00:14:34,080 Speaker 1: about the protections that they have for banking customers. I 265 00:14:34,160 --> 00:14:36,680 Speaker 1: was not aware of the efficiency with which they work, 266 00:14:37,120 --> 00:14:40,400 Speaker 1: and perhaps of the magnitude of their dedication to people 267 00:14:40,400 --> 00:14:44,000 Speaker 1: and businesses, and so I was pleasantly surprised over the 268 00:14:44,040 --> 00:14:47,160 Speaker 1: weekend to learn more than I already knew about the FDIC. Well, 269 00:14:47,280 --> 00:14:50,480 Speaker 1: pleasant is an interesting way of describing it. You learned 270 00:14:50,520 --> 00:14:53,440 Speaker 1: that you had two hundred and fifty thousand dollars that 271 00:14:53,680 --> 00:14:56,800 Speaker 1: was insured, and you would definitely get that much money, 272 00:14:57,000 --> 00:15:00,160 Speaker 1: but you had a lot more in there, and you 273 00:15:00,160 --> 00:15:03,000 Speaker 1: didn't know what would happen to the rest, right, And 274 00:15:03,400 --> 00:15:09,680 Speaker 1: there's been some discourse in the time since of hey, 275 00:15:09,760 --> 00:15:12,160 Speaker 1: if you knew your money was uninsured, why would you 276 00:15:12,240 --> 00:15:14,240 Speaker 1: leave it in the bank? Right? You know, the FDIC 277 00:15:14,400 --> 00:15:17,280 Speaker 1: will reimburse this two hundred fifty thousand dollars, but why 278 00:15:17,320 --> 00:15:20,280 Speaker 1: anything above that? And that's a fair question I think 279 00:15:20,320 --> 00:15:23,320 Speaker 1: everyone's asking themselves about in hindsight. But I think the 280 00:15:23,400 --> 00:15:26,760 Speaker 1: reality is until a few days ago, bank collapses just 281 00:15:26,920 --> 00:15:31,120 Speaker 1: didn't seem like they were on the horizon, and reputable 282 00:15:31,160 --> 00:15:34,880 Speaker 1: banks like Silicon Valley, you know, especially not So what 283 00:15:35,000 --> 00:15:38,000 Speaker 1: was the weekend like like there was nothing you could 284 00:15:38,000 --> 00:15:40,840 Speaker 1: have done given you money was stuck. But what were 285 00:15:40,880 --> 00:15:44,560 Speaker 1: the discussions you were having with your team, with your investors, 286 00:15:44,720 --> 00:15:49,120 Speaker 1: with any other interesting people that would have helped you. 287 00:15:49,680 --> 00:15:53,240 Speaker 1: It seemed to me the most common conversation, not just 288 00:15:53,360 --> 00:15:56,680 Speaker 1: within our company but among startups like us, was what 289 00:15:56,680 --> 00:15:58,920 Speaker 1: do we do in the short term? Can we make 290 00:15:58,920 --> 00:16:02,640 Speaker 1: payroll next week? And the message that I shared with 291 00:16:02,640 --> 00:16:06,720 Speaker 1: our team is we're relatively fortunate that we can that 292 00:16:06,800 --> 00:16:09,920 Speaker 1: we don't expect to have any short term disruptions in 293 00:16:09,920 --> 00:16:15,280 Speaker 1: that sense. Lots of phone calls, talking with investors, with teammates, 294 00:16:15,400 --> 00:16:18,680 Speaker 1: with family that was impacted, and plotting our way through 295 00:16:18,680 --> 00:16:22,440 Speaker 1: different scenarios, timelines for money to come back, different amounts 296 00:16:22,480 --> 00:16:25,440 Speaker 1: from money to come back. So Sunday afternoon, there's an 297 00:16:25,440 --> 00:16:30,280 Speaker 1: official announcement from the FDIC and other federal bodies saying 298 00:16:30,520 --> 00:16:33,600 Speaker 1: that they will find a way to ensure that depositors 299 00:16:33,680 --> 00:16:37,240 Speaker 1: money will be safe. It's light on details, It's unclear 300 00:16:38,320 --> 00:16:40,760 Speaker 1: what it means for the depositor apart from the fact 301 00:16:40,760 --> 00:16:45,120 Speaker 1: that the money will eventually come to them. Monday comes along. 302 00:16:45,280 --> 00:16:48,160 Speaker 1: What do you do So Monday comes along and we 303 00:16:48,280 --> 00:16:52,560 Speaker 1: have access to all of our funds the insured and uninsured. 304 00:16:53,160 --> 00:16:56,720 Speaker 1: I was amazed at just how quickly that access had 305 00:16:56,760 --> 00:17:00,640 Speaker 1: been restored. We had to make another determine nation, which 306 00:17:00,680 --> 00:17:05,680 Speaker 1: is what's going on in the macroeconomic picture, what's going 307 00:17:05,680 --> 00:17:09,240 Speaker 1: on with banks. We need to make sure that this 308 00:17:09,280 --> 00:17:12,280 Speaker 1: money is safe. So we just said, hey, we need 309 00:17:12,320 --> 00:17:14,639 Speaker 1: this money to be in a fortress at least for 310 00:17:14,640 --> 00:17:18,040 Speaker 1: the time being, and we think the safest place for 311 00:17:18,119 --> 00:17:22,080 Speaker 1: this to go is into sort of the biggest banks possible. 312 00:17:22,440 --> 00:17:25,359 Speaker 1: So the position you ended up taking on Monday is 313 00:17:25,400 --> 00:17:29,600 Speaker 1: different from the one you were contemplating on Thursday, which is, 314 00:17:30,720 --> 00:17:33,720 Speaker 1: if we draw our money out, there'll be a bank 315 00:17:33,800 --> 00:17:36,680 Speaker 1: run and it'll collapse. So maybe we shouldn't do it. 316 00:17:37,240 --> 00:17:40,440 Speaker 1: But Monday comes along and you do decide to take 317 00:17:40,440 --> 00:17:44,200 Speaker 1: your money out. So what made you take that decision 318 00:17:44,320 --> 00:17:47,320 Speaker 1: and not support the bank, which was a moral position 319 00:17:47,400 --> 00:17:50,679 Speaker 1: you would ready to take Thursday morning. Yeah, it's a 320 00:17:50,720 --> 00:17:55,080 Speaker 1: difficult position. The determination on Monday to move that money 321 00:17:55,240 --> 00:17:58,199 Speaker 1: from a regional bank to a large bank is not 322 00:17:58,280 --> 00:18:01,720 Speaker 1: an easy one because I really believe in the value 323 00:18:01,760 --> 00:18:04,600 Speaker 1: of community banks, in regional banks, and I think they 324 00:18:04,600 --> 00:18:08,360 Speaker 1: serve a very valuable purpose in society. But the most 325 00:18:08,359 --> 00:18:10,000 Speaker 1: important thing for me to do is to protect the 326 00:18:10,000 --> 00:18:14,280 Speaker 1: shareholders of the company. And once we saw the bank 327 00:18:14,359 --> 00:18:20,399 Speaker 1: actually go down, that changes things because now you're scared. 328 00:18:20,520 --> 00:18:24,359 Speaker 1: You know. Now it's it's not an abstract game theory calculation, 329 00:18:24,359 --> 00:18:34,679 Speaker 1: it's a real reality after the break. Why was SVB 330 00:18:35,000 --> 00:18:37,920 Speaker 1: so important to startups? And who will fill the gap 331 00:18:38,160 --> 00:18:52,720 Speaker 1: left by the collapse. Let's take a bigger step back 332 00:18:52,880 --> 00:18:55,679 Speaker 1: and tell us when it is that you first became 333 00:18:55,800 --> 00:18:58,480 Speaker 1: a customer of Silicon Valley Bank and why did you 334 00:18:58,560 --> 00:19:01,000 Speaker 1: choose to do it. Sure, you begin working with Silicon 335 00:19:01,080 --> 00:19:03,240 Speaker 1: Valley Bank about a year ago, a little bit less 336 00:19:03,240 --> 00:19:06,320 Speaker 1: than a year ago. And I think it's first important 337 00:19:06,359 --> 00:19:09,280 Speaker 1: to note that Silicon Valley served the communities of the 338 00:19:09,320 --> 00:19:13,440 Speaker 1: broader Bay area. And this is not a startup technology 339 00:19:13,600 --> 00:19:16,280 Speaker 1: entrepreneur bank. This is a bank that folks from all 340 00:19:16,320 --> 00:19:18,880 Speaker 1: walks of life are using for personal and business finance. 341 00:19:19,560 --> 00:19:23,640 Speaker 1: But that being said, speaking as a technology founder, Silicon 342 00:19:23,720 --> 00:19:27,879 Speaker 1: Valley Bank always seem to get startup life in a 343 00:19:27,920 --> 00:19:30,080 Speaker 1: way that other banks maybe would not. What do you 344 00:19:30,119 --> 00:19:34,280 Speaker 1: mean exactly when you say that they understood startup life? Yeah, 345 00:19:34,320 --> 00:19:39,119 Speaker 1: so the profile of a healthy, venture backed, early stage 346 00:19:39,119 --> 00:19:44,359 Speaker 1: technology company looks so different from the profile of other 347 00:19:44,400 --> 00:19:47,840 Speaker 1: types of early stage companies that you might see typically 348 00:19:47,880 --> 00:19:51,679 Speaker 1: outside of the Silicon Valley technology world. Early stage companies 349 00:19:51,680 --> 00:19:54,399 Speaker 1: are typically growing very quickly. There's often a period where 350 00:19:54,840 --> 00:19:57,200 Speaker 1: they're not making a lot of money, and in some 351 00:19:57,280 --> 00:20:00,840 Speaker 1: cases very early on, they're building without even a firm 352 00:20:00,920 --> 00:20:02,880 Speaker 1: knowledge yet of who they're going to sell to. And 353 00:20:02,960 --> 00:20:05,879 Speaker 1: in the bank balance sheet, it's basically looking like a 354 00:20:05,880 --> 00:20:08,040 Speaker 1: big chunk of money comes in and then it's being 355 00:20:08,119 --> 00:20:12,119 Speaker 1: drawn out, drawn out, sometimes very very quickly, because the 356 00:20:12,200 --> 00:20:15,400 Speaker 1: company is going through this growth phase exactly, so it's 357 00:20:15,440 --> 00:20:19,720 Speaker 1: not a weekly deposit of revenue. And I think the 358 00:20:19,880 --> 00:20:23,600 Speaker 1: banks sort of understood that model, and one way in 359 00:20:23,600 --> 00:20:25,840 Speaker 1: which it understood it, or maybe one way in which 360 00:20:25,880 --> 00:20:30,800 Speaker 1: that understanding could be seen, was through their venture debt programs, 361 00:20:30,920 --> 00:20:34,200 Speaker 1: where if an early stage company had raised enough external 362 00:20:34,200 --> 00:20:38,399 Speaker 1: equity capital that effectively de risked the company to some extent. 363 00:20:38,760 --> 00:20:41,679 Speaker 1: Silicon Valley Bank was known for giving loans to these 364 00:20:41,720 --> 00:20:45,760 Speaker 1: early stage companies, and I think being confident giving that 365 00:20:46,040 --> 00:20:49,600 Speaker 1: sort of loan requires you to be in the community 366 00:20:49,640 --> 00:20:51,760 Speaker 1: and to sort of know what's going on on the ground. 367 00:20:51,920 --> 00:20:55,400 Speaker 1: And Noah differentiates a good investment from a bad one. 368 00:20:56,160 --> 00:20:58,800 Speaker 1: CBS Venture Debt program is one of the reasons it 369 00:20:58,880 --> 00:21:02,800 Speaker 1: was so attractive to startups. Most loans offered by banks 370 00:21:02,880 --> 00:21:06,280 Speaker 1: involved some kind of collateral. For example, if you take 371 00:21:06,320 --> 00:21:09,560 Speaker 1: out a mortgage, the house is the collateral until you 372 00:21:09,600 --> 00:21:12,720 Speaker 1: pay off your loan to the bank. Early stage startups 373 00:21:12,840 --> 00:21:16,000 Speaker 1: usually don't have much to offer as a collateral. That's 374 00:21:16,040 --> 00:21:19,720 Speaker 1: what makes ventured at higher risk than most loans, and 375 00:21:19,880 --> 00:21:22,360 Speaker 1: a leap of faith not every bank is willing to take. 376 00:21:22,960 --> 00:21:25,920 Speaker 1: I think it remains to be seen whether this contributed 377 00:21:26,000 --> 00:21:30,480 Speaker 1: to the bank's demise. Frankly, I think the early indications 378 00:21:30,520 --> 00:21:33,480 Speaker 1: are that it did not, that it really had more 379 00:21:33,520 --> 00:21:37,840 Speaker 1: to do with rising interest rates and a general decline 380 00:21:38,040 --> 00:21:41,400 Speaker 1: of venture funding going into the pockets of these companies. 381 00:21:41,800 --> 00:21:43,600 Speaker 1: So I don't want to necessarily say that the bank 382 00:21:43,640 --> 00:21:45,159 Speaker 1: had it all figured out. I think that remains to 383 00:21:45,160 --> 00:21:47,879 Speaker 1: be seen. But I think it made Silicon Valley Bank unique, 384 00:21:48,359 --> 00:21:51,480 Speaker 1: and as a founder, you feel like you have potentially 385 00:21:51,600 --> 00:21:55,080 Speaker 1: someone who who just sort of gets the business that 386 00:21:55,119 --> 00:21:58,520 Speaker 1: you're trying to build. Silicon Valley Bank is a bank 387 00:21:58,560 --> 00:22:02,399 Speaker 1: for many types of startups, but climate tech startups have 388 00:22:02,480 --> 00:22:07,280 Speaker 1: been growing in number, especially in recent years. So if 389 00:22:07,280 --> 00:22:10,760 Speaker 1: we look at it from a climate tech perspective, what 390 00:22:10,840 --> 00:22:13,080 Speaker 1: do you think a collapse of a bank like this 391 00:22:13,600 --> 00:22:17,600 Speaker 1: does to the community. Looking at sector wide, we're at 392 00:22:17,600 --> 00:22:22,240 Speaker 1: a point now where these early stage climate companies have 393 00:22:22,840 --> 00:22:24,600 Speaker 1: many of them have raised a lot of money. We're 394 00:22:24,640 --> 00:22:27,960 Speaker 1: going into an environment where venture capital seems to be 395 00:22:28,080 --> 00:22:32,639 Speaker 1: drying up, and so there's a broad sense that you 396 00:22:32,680 --> 00:22:35,040 Speaker 1: really need to protect that money. You need to hunker 397 00:22:35,040 --> 00:22:39,040 Speaker 1: down and build. And there's some companies who have just 398 00:22:39,080 --> 00:22:43,439 Speaker 1: received giant grants from the Bipartisan Infrastructure Law and the 399 00:22:43,480 --> 00:22:46,720 Speaker 1: Inflation Reduction Act here in the US need to protect 400 00:22:46,760 --> 00:22:50,840 Speaker 1: that money. So I think it's a tough time for 401 00:22:50,880 --> 00:22:53,080 Speaker 1: this to happen. It's always tough, but I think we're 402 00:22:53,080 --> 00:22:55,040 Speaker 1: at a point where that having money in the bank 403 00:22:55,640 --> 00:22:58,320 Speaker 1: is something you don't want to take for granted. Often. 404 00:22:58,440 --> 00:23:00,919 Speaker 1: Thank you so much for taking the time. I should 405 00:23:00,960 --> 00:23:06,320 Speaker 1: note we are talking Monday afternoon, Pacific time. The news 406 00:23:06,400 --> 00:23:10,359 Speaker 1: has certainly been constant about Silicon Valley Bank over the 407 00:23:10,359 --> 00:23:13,760 Speaker 1: past few days, and who knows what comes in the 408 00:23:13,800 --> 00:23:16,879 Speaker 1: next few days. But it is really good to be 409 00:23:16,920 --> 00:23:20,119 Speaker 1: able to get a perspective of what it was to 410 00:23:20,200 --> 00:23:24,040 Speaker 1: be a startup that was dealing with this crisis. Well, 411 00:23:24,040 --> 00:23:26,000 Speaker 1: it's a pleasure to talk with you, and hopefully there 412 00:23:26,040 --> 00:23:29,160 Speaker 1: won't be anything else newsworthy by the time this episode airs. 413 00:23:32,080 --> 00:23:35,200 Speaker 1: So Mark, we are talking on Wednesday, fifteenth March, and 414 00:23:35,600 --> 00:23:39,480 Speaker 1: startups have got their money back. Those deposits ended up 415 00:23:39,560 --> 00:23:43,640 Speaker 1: essentially being insured by the US government. What exactly did 416 00:23:43,680 --> 00:23:46,639 Speaker 1: the government do to get this panic to subside? They 417 00:23:46,680 --> 00:23:50,159 Speaker 1: stepped in to basically guarantee every single depositor, So they 418 00:23:50,160 --> 00:23:53,240 Speaker 1: didn't bail out the shareholders of SVB, but they did 419 00:23:53,359 --> 00:23:55,840 Speaker 1: promise that anyone who had money with the bank it 420 00:23:55,840 --> 00:23:57,199 Speaker 1: would be able to get it out. Yeah, we had 421 00:23:57,200 --> 00:23:59,280 Speaker 1: startups panicking over the weekend, like how are we going 422 00:23:59,320 --> 00:24:01,560 Speaker 1: to pay role on Monday and comparing for all the 423 00:24:01,680 --> 00:24:05,280 Speaker 1: sort of worst case contingency, so that so far seems 424 00:24:05,320 --> 00:24:08,760 Speaker 1: to be avoided. So right now there's this sort of 425 00:24:08,800 --> 00:24:12,600 Speaker 1: complicated dance of trying to sell off the bank potentially 426 00:24:12,680 --> 00:24:15,840 Speaker 1: one piece or different parts, and so someone could take 427 00:24:15,840 --> 00:24:18,840 Speaker 1: over the commercial banking operation, restor B, someone else could 428 00:24:18,840 --> 00:24:21,120 Speaker 1: take over sort of lending operations. They have different kind 429 00:24:21,119 --> 00:24:22,879 Speaker 1: of components and it's likely that they're going to be 430 00:24:22,960 --> 00:24:26,479 Speaker 1: split up and sub had branches in several countries in 431 00:24:26,520 --> 00:24:30,679 Speaker 1: the UK. That was actually purchased outright by HSBC for 432 00:24:30,760 --> 00:24:33,879 Speaker 1: one pound, but we reported the HSBC is injecting at 433 00:24:33,920 --> 00:24:37,600 Speaker 1: least two billion pounds of capital. The same sort of 434 00:24:37,600 --> 00:24:40,760 Speaker 1: situation here where they're guaranteeing that any companies that were 435 00:24:40,760 --> 00:24:44,920 Speaker 1: banking with SVB will continue, You know, it's not necessarily 436 00:24:44,960 --> 00:24:48,240 Speaker 1: going to be. HSBC is a very different bank than SVB, 437 00:24:48,400 --> 00:24:50,840 Speaker 1: so we don't know how here in the UK they'll 438 00:24:50,920 --> 00:24:53,640 Speaker 1: necessarily treat to customers or sort of operate the same way. 439 00:24:54,040 --> 00:24:58,080 Speaker 1: In the past year, because of the financial situation, venture 440 00:24:58,080 --> 00:25:02,480 Speaker 1: capital funding itself has fallen. However, the bright spot was 441 00:25:02,560 --> 00:25:06,040 Speaker 1: climate tech funding, which continued to grow. Does that get 442 00:25:06,040 --> 00:25:08,800 Speaker 1: affected now with what's happened at SVB. Yeah, I think 443 00:25:08,800 --> 00:25:11,959 Speaker 1: they answered for that. We'll take some time, certainly, like 444 00:25:12,119 --> 00:25:14,800 Speaker 1: how well, to see how they sort out the situation 445 00:25:14,840 --> 00:25:18,800 Speaker 1: in the US. I do think there are certainly concerns 446 00:25:18,880 --> 00:25:21,960 Speaker 1: that whatever bank steps in might not look at climate 447 00:25:22,000 --> 00:25:23,880 Speaker 1: tech the same way, might not be willing to make 448 00:25:24,400 --> 00:25:27,560 Speaker 1: as aggressive a loan similar loans, and then how it 449 00:25:27,600 --> 00:25:30,399 Speaker 1: impacts I think the kind of the domino effect it 450 00:25:30,440 --> 00:25:33,000 Speaker 1: has with venture capital when you had a bank like 451 00:25:33,160 --> 00:25:35,399 Speaker 1: SVB being willing to inject its own capital on a 452 00:25:35,400 --> 00:25:38,159 Speaker 1: lot this venture debt. I think that really changed the 453 00:25:38,200 --> 00:25:40,199 Speaker 1: outlook for a lot of the VC firms, and so 454 00:25:40,240 --> 00:25:42,720 Speaker 1: there's a likelihood that could be much more cautious. I 455 00:25:42,760 --> 00:25:45,679 Speaker 1: think a lot of climate tech companies, after they get 456 00:25:45,720 --> 00:25:48,200 Speaker 1: to a certain stage of growth, they still need a 457 00:25:48,280 --> 00:25:50,440 Speaker 1: lot of money to invest in. If you're building a 458 00:25:50,800 --> 00:25:54,760 Speaker 1: something a battery plant or carbon capture facility, that requires 459 00:25:54,800 --> 00:25:58,119 Speaker 1: a lot of capital before you get money from customers 460 00:25:58,200 --> 00:26:01,199 Speaker 1: up front. And that's where SBB I think played a 461 00:26:01,280 --> 00:26:04,320 Speaker 1: very significant role. And that's just an opening question about 462 00:26:04,359 --> 00:26:08,680 Speaker 1: what happens there. So when we go and interview CEOs, 463 00:26:08,720 --> 00:26:11,120 Speaker 1: you know, we don't typically ask them what Wi Fi 464 00:26:11,160 --> 00:26:14,200 Speaker 1: service they use, because why would you There's a Wi 465 00:26:14,200 --> 00:26:17,400 Speaker 1: Fi service, it works, and they do their job unless 466 00:26:17,440 --> 00:26:20,480 Speaker 1: it doesn't. Right, if there was a data breach because 467 00:26:20,520 --> 00:26:22,800 Speaker 1: of the Wi Fi service they use, we will be 468 00:26:22,880 --> 00:26:26,239 Speaker 1: asking CEOs what Wi Fi service do you use? And 469 00:26:26,320 --> 00:26:28,159 Speaker 1: that's kind of the thing that we're going to have 470 00:26:28,160 --> 00:26:30,720 Speaker 1: to do with banks now. You know, we were in 471 00:26:30,760 --> 00:26:34,640 Speaker 1: Paris yesterday looking at climate tech startups and we had 472 00:26:34,680 --> 00:26:37,160 Speaker 1: to ask the question, what are you doing about your 473 00:26:37,240 --> 00:26:39,920 Speaker 1: banking now. And one of the founders of a floating 474 00:26:39,920 --> 00:26:44,159 Speaker 1: solo company told us that she, even though wasn't banking 475 00:26:44,160 --> 00:26:48,440 Speaker 1: with SBB, did have money in some small banks, and 476 00:26:48,640 --> 00:26:51,200 Speaker 1: given what had happened over the last few days, has 477 00:26:51,200 --> 00:26:52,800 Speaker 1: pulled that money out and put it in a big 478 00:26:52,800 --> 00:26:56,240 Speaker 1: bank because that's the flight to safety. That's what she 479 00:26:56,400 --> 00:26:58,959 Speaker 1: feels would be good for her company. But do you 480 00:26:59,040 --> 00:27:02,679 Speaker 1: think that the whole created by SBB's collapse could be 481 00:27:02,760 --> 00:27:06,760 Speaker 1: filled by another bank or many banks providing the different 482 00:27:06,800 --> 00:27:10,080 Speaker 1: services that SBB seemed to provide for startups? I mean, 483 00:27:10,119 --> 00:27:12,720 Speaker 1: I don't think like some of the underlying the situation 484 00:27:12,760 --> 00:27:14,679 Speaker 1: that a lot of these climate companies are operating and 485 00:27:14,720 --> 00:27:17,959 Speaker 1: hasn't really changed, right, Like, there are still ESG targets 486 00:27:18,080 --> 00:27:20,720 Speaker 1: every single company needs to meet, there's still this rushing 487 00:27:21,200 --> 00:27:25,520 Speaker 1: deadline to net zero, and there's still a phenomenal growth opportunity. 488 00:27:25,640 --> 00:27:27,440 Speaker 1: And so I think if you're a bank that's sort 489 00:27:27,440 --> 00:27:31,320 Speaker 1: of operating with just purely sort of financial logic, I 490 00:27:31,480 --> 00:27:33,879 Speaker 1: do see that they could step in. I guess the 491 00:27:33,960 --> 00:27:36,359 Speaker 1: question would be how much of was SEB the climate 492 00:27:36,359 --> 00:27:38,879 Speaker 1: bank because it was willing to because it had this 493 00:27:38,960 --> 00:27:42,520 Speaker 1: network of relationships right across the Silicon Valley and other 494 00:27:42,600 --> 00:27:45,159 Speaker 1: tech sectors. Or was it the Climate Bank because it 495 00:27:45,200 --> 00:27:47,200 Speaker 1: was willing to make bets at other banks didn't make. 496 00:27:47,480 --> 00:27:49,680 Speaker 1: And we're talking at this time where of course all 497 00:27:49,720 --> 00:27:52,879 Speaker 1: of this bank money is private capital, but there's a 498 00:27:52,960 --> 00:27:55,800 Speaker 1: huge amount of government capital that's going to be injected 499 00:27:55,800 --> 00:27:58,919 Speaker 1: into this sector. There's the Inflation Reduction Act in the US, 500 00:27:59,160 --> 00:28:01,960 Speaker 1: there's the Green D in Europe. Does that money become 501 00:28:02,000 --> 00:28:05,800 Speaker 1: more important now that you don't have access to easier 502 00:28:05,840 --> 00:28:09,399 Speaker 1: capital through banks like SBB certainly, like we have already 503 00:28:09,400 --> 00:28:12,000 Speaker 1: seen that the IRA's been implemented in the US right 504 00:28:12,040 --> 00:28:14,800 Speaker 1: there kind of it has immediate impacts on dozens of 505 00:28:14,840 --> 00:28:19,919 Speaker 1: different sectors, and where like just products and financing is 506 00:28:19,960 --> 00:28:23,160 Speaker 1: so much easier for companies to going into the space, 507 00:28:23,200 --> 00:28:26,080 Speaker 1: and we see in Europe companies that are like considering 508 00:28:26,119 --> 00:28:28,640 Speaker 1: making a jump for that reason, and so I think 509 00:28:28,760 --> 00:28:31,840 Speaker 1: those will become much more vital to the company's future, 510 00:28:32,000 --> 00:28:35,320 Speaker 1: particularly if raising money from certain from venture capital or 511 00:28:35,359 --> 00:28:37,240 Speaker 1: in venture data is it's no longer on the table. 512 00:28:38,720 --> 00:28:41,200 Speaker 1: Thanks Mark for your time. Yeah, thanks for having me. 513 00:28:51,360 --> 00:28:54,800 Speaker 1: Svb's collapse is a rapidly evolving story. For all the 514 00:28:54,880 --> 00:28:58,320 Speaker 1: latest coverage, visit bloomboog dot com or read the articles 515 00:28:58,400 --> 00:29:02,280 Speaker 1: we've linked in the show notes. Thanks for listening to Zero. 516 00:29:02,560 --> 00:29:05,000 Speaker 1: If you liked this episode, please take a moment to 517 00:29:05,080 --> 00:29:08,240 Speaker 1: rate and review the show on Apple Podcasts or Spotify, 518 00:29:08,880 --> 00:29:11,040 Speaker 1: send it to a friend, or share it with someone 519 00:29:11,120 --> 00:29:13,880 Speaker 1: in the valley. If you've got a suggestion for guests, 520 00:29:14,040 --> 00:29:16,760 Speaker 1: or topics, or something you just want us to look into, 521 00:29:17,080 --> 00:29:19,720 Speaker 1: get in touch at zero port at bloomberg dot net. 522 00:29:20,400 --> 00:29:24,080 Speaker 1: Zero's producer is Oscar Boyd and senior producer is Christine 523 00:29:24,120 --> 00:29:29,000 Speaker 1: driscoll Our. Theme music is composed by Wonderley, thanks to Venkatisvanathan, 524 00:29:29,160 --> 00:29:33,760 Speaker 1: Kira Bindrim, Brian Eckhouse, Olivia Rudgard, Coco Leu, George Soul 525 00:29:33,960 --> 00:29:37,480 Speaker 1: and David Baker. I'm Akshatrati back next week.