Speaker 1: Welcome to zero. I'm Kshatrati. This week the collapse of
Speaker 1: a climate bank. Just over a week ago, Silicon Valley
Speaker 1: Bank or SVB had a sterling reputation as a climate bank.
Speaker 1: It served more than fifteen hundred companies doing sustainability work,
Speaker 1: which included everything from small innovative climate startups to mid
Speaker 1: size solo projects. It was a bank built around working
Speaker 1: with young companies pursuing big ideas. Late last week, the
Speaker 1: bank collapsed yesterday. SBB says that they are trying to
Speaker 1: raise more capital. There are recent developments the concern a
Speaker 1: few banks, and you have people like Peter Thor advising
Speaker 1: clients to pull money out. You get that run on
Speaker 1: the banks. The government regulator and charge, the FDIC, took
Speaker 1: control of Silicon Valley Banks as sets as the president.
Speaker 1: What do you know right now about why this happened.
Speaker 1: It started with a worry among a small group of
Speaker 1: venture capitalists and startups that the bank was running shot
Speaker 1: on cash. That snowball into a bank run, and within
Speaker 1: hours the bank's customers had tried to withdraw forty two
Speaker 1: billion dollars, about a fifth of the bank's holdings. The
Speaker 1: shortage of cash became so severe that the bank seized
Speaker 1: normal operations and was taken over by US regulators to
Speaker 1: limit the damage. The very next day, startups began to
Speaker 1: worry about how they would pay their staff the following week,
Speaker 1: and venture capitalists worked through the weekend to stump up
Speaker 1: emergency cash. Relief came in the form of US regulators
Speaker 1: promising that all deposits will be safe, and on Monday,
Speaker 1: startups could breathe easy as they could access their cash again.
Speaker 1: But the headache is far from over, particularly for climate
Speaker 1: tech companies that are readying themselves for explosive growth and
Speaker 1: need cops of cash. Climate tech has been a bright
Speaker 1: spot in the last year. While total venture capital investments
Speaker 1: in twenty twenty two fell, investments in climate tech actually increased,
Speaker 1: reaching almost sixty billion dollars. According to Bloomberg an EF.
Speaker 1: One way to understand the SBB debacle is to experience
Speaker 1: it through the eyes of a startup founder, and so
Speaker 1: I spoke with Austin Sendek, the CEO of Ionics, to
Speaker 1: hear how the bank's collapse pile stress onto his fledgling company.
Speaker 1: But first to set the scene, I asked my colleague
Speaker 1: Mark Bourgen to give us the Big Picture view Mark.
Speaker 1: Welcome to the show, Thanks for having me, and welcome
Speaker 1: to London. You've just left San Francisco and you now
Speaker 1: cover the tech beat here in London. Of course, climate
Speaker 1: tech is something you've been writing about for some time
Speaker 1: and you will continue. But what a wreck have you
Speaker 1: left behind? It seems like I got out just in time.
Speaker 1: You know. It's funny. We had a story Tuesday night
Speaker 1: from our UK team about how they're preparing the budget
Speaker 1: here in the UK, and they were frantically trying to
Speaker 1: scrub the terms Silicon Valley from the talk. It just
Speaker 1: speaks volumes about maybe this place that was shorthand for
Speaker 1: innovation and an entrepreneurship and phenomenal success might mean something
Speaker 1: very different. Now, let's just start with the basics. What
Speaker 1: is Silicon Valley Bank. So Silicon Valley Bank they rebranded
Speaker 1: the SVB was started in eighty three, which I forty
Speaker 1: years ago, because it's like this niche and really took
Speaker 1: off I think in the past twenty years. Something that
Speaker 1: would service the area around northern California right that sector,
Speaker 1: the software industry, or a reliable place where a company
Speaker 1: just getting off the ground typically turned to their investors
Speaker 1: and asked, you know, how do we set up payroll?
Speaker 1: How do we set up a bank? And they would
Speaker 1: direct him to SVB, which became not just a commercial bank,
Speaker 1: but put far more in the tech sector. They started
Speaker 1: to become a lender themselves. They dipped into providing mortgages.
Speaker 1: They haven't gotten too wineries I learned we learned about
Speaker 1: this past weekend, So I think more than a bank,
Speaker 1: they'd really positioned themselves a sort of integral part of
Speaker 1: the tech world. I mean there was a partner, Sequoia Capital,
Speaker 1: its big venture capital firms that equated over the weekend.
Speaker 1: They're they're collapsed to a death in the family. And
Speaker 1: what specifically did it do for climate tech startups? So
Speaker 1: SBB had focused on climate tech recently as scenario of growth,
Speaker 1: which is very true when especially in the past couple
Speaker 1: of years, where a lot of other sectors were we're
Speaker 1: falling behind. So I think in addition to their commercial banking,
Speaker 1: so if a startup comes to them and they just
Speaker 1: want to park their money and use them as their
Speaker 1: primary bank, they also provide a lot of what's called
Speaker 1: venture debt, which is a way of financing a company
Speaker 1: sort of different than like what you'd say, if a
Speaker 1: venture capitalist gives you money, there is an equity round.
Speaker 1: They own a part portion of your company. Venture debt
Speaker 1: is basically a loan. It could be like a very
Speaker 1: low interest rate loan, and it's something for companies that
Speaker 1: a lot of startups are are moving pretty quickly. They
Speaker 1: don't have a lot of cash coming in. Often they're
Speaker 1: not they're losing a lot of money. But what they
Speaker 1: do need is a lot of capital upfront. And climate companies,
Speaker 1: particularly ones that are working with hardware batteries trying to
Speaker 1: build something like research intensive, they need a lot of
Speaker 1: upprop capital with really nothing coming in. And you know,
Speaker 1: they also advertised that they had more than fifteen hundred
Speaker 1: companies that were climate startups that were their customers. We
Speaker 1: understand that they also underwrote a lot of solar projects
Speaker 1: because solar was a big booming industry in the last
Speaker 1: twenty years. And then they did these other things which
Speaker 1: we don't think about. Typically, if you are a startup
Speaker 1: and you have one hundred million dollars sitting in the
Speaker 1: bank account with inflation, that money is actually losing its values,
Speaker 1: So you want some interest to be generated on that
Speaker 1: and they provided for what it's called a money market account,
Speaker 1: where that account actually gave you a higher interest rate
Speaker 1: just for the money sitting in that bank. So now
Speaker 1: we know that the bank has collapsed and the US
Speaker 1: government is figuring out a way to deal with what
Speaker 1: happens next. But what actually went wrong? Why did it collapse?
Speaker 1: I mean, it happened incredibly quickly, and for some people
Speaker 1: that learned about Silicon Valley Bank on Thursday and then
Speaker 1: a day later it was gone. My understanding is that
Speaker 1: in the past several years, Silicon Valley Bank operated with
Speaker 1: this low interest rate environment, and because they banked with
Speaker 1: a tech sector, it's different than a lot of traditional banks,
Speaker 1: in part because a lot of the customers didn't need
Speaker 1: loans because they were getting tons of venture capital coming
Speaker 1: in like that wasn't the problem, and so they would
Speaker 1: park their money with SBB. What SBB did was they
Speaker 1: bought a lot of long term bonds and some mortgage
Speaker 1: backed securities, those things that were sort of familiar for
Speaker 1: us from the housing crisis, These assets that looked really
Speaker 1: good and were very good on paper when interest rates
Speaker 1: were low. And then when happened was a fed because
Speaker 1: of inflation in the US started to increase interest rates
Speaker 1: that no longer looked like a great financial bet. Last week,
Speaker 1: SPB put out an announcement that they were going to
Speaker 1: recapitalize and how to restructure their balance sheet. They need
Speaker 1: to raise more money because their financial position had changed.
Speaker 1: It's just something that the companies didn't really anticipate any
Speaker 1: immediate backlash, certainly something that we saw, and so there
Speaker 1: were companies venture capitalists that had both their money with SVB,
Speaker 1: but then a lot of their portfolio companies and started
Speaker 1: to advise our companies to maybe should pull out this
Speaker 1: no longer looks like a safe place to bank. It
Speaker 1: happened very rapidly, where one investor went, the next, and
Speaker 1: the next their stock started to fall. I think that
Speaker 1: coincided with a lot of companies either pulling out their
Speaker 1: deposits or then trying to pull out their deposits discovering
Speaker 1: that they couldn't, and that just became the snowball effect
Speaker 1: where within a day they no longer existed. Now that's
Speaker 1: called a classic bank run right banking one oh one,
Speaker 1: which is you think when you have money in your
Speaker 1: account under your name in a bank, you can always
Speaker 1: go to the bank and get it. Well, technically, yes,
Speaker 1: if the bank has that cash available, and ninety nine
Speaker 1: of the time they do. But when everybody wants their
Speaker 1: cash at the same time, that is when a bank
Speaker 1: run happens, because that cash is actually not sitting in
Speaker 1: an account untouched. It's being put to work so that
Speaker 1: the bank can make some money and then provide the
Speaker 1: services which you are getting for free. And as we
Speaker 1: learned on Thursday, something like forty billion dollars was withdrawn
Speaker 1: or requested from Silicon Valley Bank, which had about two
Speaker 1: and twenty billion dollars of assets. That's a huge amount
Speaker 1: of money to be in cashed really quickly. There's a
Speaker 1: really good Simpsons episode where Bart Simpson, if you recall,
Speaker 1: demonstrates what a bank run is right where he tells
Speaker 1: everyone waiting in line that the money is going to
Speaker 1: disappear and they have to pull it out. Now, what
Speaker 1: do you mean the breakers out of money in servent
Speaker 1: you only have enough cash for the next three customers
Speaker 1: just second here, And that's basically what happened. Like people
Speaker 1: went to SVB to pull all their money, they discovered
Speaker 1: they couldn't, and that just caused mass panic. EONIX is
Speaker 1: a climate startup using artificial intelligence to search for new
Speaker 1: battery materials. What the company does could make future batteries cheaper,
Speaker 1: something the world really needs. The company has raised around
Speaker 1: three million dollars, of which a big chunk was in SVB.
Speaker 1: I caught up with Eonix CEO Austin Sendec on Monday
Speaker 1: evening to find out how svb's collapse has affected him
Speaker 1: and his company. Now, before I call it the most
Speaker 1: stressful week, what was the stress level for you? Like,
Speaker 1: out of ten? Probably at ten? Okay, so one of
Speaker 1: the most stressful weeks in your life, I'll just say that. Yeah.
Speaker 1: So a company in your position, which is just about
Speaker 1: to get started hire people, is going to need money.
Speaker 1: And over the past week, we've seen the collapse of
Speaker 1: Silicon Valley Bank, and you were a customer of the bank,
Speaker 1: and what transpired ended up being one of the most
Speaker 1: us full of weeks of your life. What happened, Well,
Speaker 1: I think we're all still trying to figure that out.
Speaker 1: But it was a weekend of uncertainty. So Thursday morning,
Speaker 1: I woke up to some news that there were questions
Speaker 1: and concerns about Silicon Valley Bank, and I actually texted
Speaker 1: my co founder and said he might have asked me first.
Speaker 1: He said, you know, is this a problem? And I
Speaker 1: remember saying, Hey, I don't think Silicon Valley Bank's going anywhere, right,
Speaker 1: This bank's been around for forty years. And just within
Speaker 1: a couple hours, after all kinds of texts and emails,
Speaker 1: they're that really morphed into some pretty serious concern and
Speaker 1: the calculation really went from hey, you know this is
Speaker 1: just some online chatter too, it really sounds like the
Speaker 1: bank's in trouble. So by the end of the day Thursday,
Speaker 1: we made the determination to withdraw our money. But unfortunately,
Speaker 1: like many others, we were too late. How much money
Speaker 1: did you have in the bank. I won't say exactly
Speaker 1: how much money we had in the bank, but I
Speaker 1: will say that we were over the FDIC insured limit,
Speaker 1: so there was uninsured deposits there in the bank. FDIC
Speaker 1: is a Federal deposit insurance corporation created in nineteen thirty
Speaker 1: three after the Great Depression. Today, it guarantees deposits up
Speaker 1: to two hundred and fifty thousand dollars. Anything above that
Speaker 1: amount is uninsured. That means there's no guarantee it will
Speaker 1: be returned if you have a million dollars in the bank, Well,
Speaker 1: lucky you. But if the bank goes under, you could
Speaker 1: lose seven hundred and fifty thousand dollars. If you have
Speaker 1: ten million dollars, well you get the picture. And say
Speaker 1: he had lost the money, what would have happened to
Speaker 1: you as a company. Well, you know, we're small and
Speaker 1: we're early and that would have been a really severe impact.
Speaker 1: We had money across institutions. We had money to continue
Speaker 1: to fund our operations, so that made us relatively fortunate.
Speaker 1: I know that there were other entrepreneurs in early stage
Speaker 1: companies who didn't know if they could make payroll on Monday.
Speaker 1: So we knew that we could. But the long term
Speaker 1: outlook if that money had disappeared would have been pretty bleak.
Speaker 1: And so when you learn a problem on Thursday morning,
Speaker 1: you're like, well, online chatter, maybe this is something when
Speaker 1: you should think about, You think about it, you talk
Speaker 1: a little more in your life. Oh, maybe there's a
Speaker 1: real problem, and so you try to take your money out.
Speaker 1: What happens when you try to do it. I think
Speaker 1: one of the interesting things that will remember from this
Speaker 1: incident is that this was probably the first bank run
Speaker 1: in the era of virtual banking, right, so no one's
Speaker 1: waiting in line to pull their money out of the bank.
Speaker 1: People are logging in and wiring money out within a minute.
Speaker 1: So this is happening very quickly. And Thursday afternoon there's
Speaker 1: a brief moment where there's a really serious discussion that
Speaker 1: we're having internally, which is there's some advice that we
Speaker 1: should pull the money out, but there's this sort of
Speaker 1: ethical consideration, which is, you want to support the bank.
Speaker 1: Silicon Valley Bank has been a pillar of the technology
Speaker 1: industry and really of the entire Bay area for a
Speaker 1: long time, and so there's you know, you don't want
Speaker 1: to sort of leave the bank there. But then there's
Speaker 1: this very serious concern of, hey, if this does happen,
Speaker 1: if the bank does collapse, you don't want to have
Speaker 1: our money stuck in there. And it was a little
Speaker 1: bit sort of prisoner's dilemma, right, You're trying to game
Speaker 1: theory your way through this, and at the end of
Speaker 1: the day, my obligation as CEO of the company is
Speaker 1: to our shareholders and to protect our shareholders. And so
Speaker 1: unfortunately that led to the very difficult determination that we
Speaker 1: should really get our money out of here before it's
Speaker 1: too late. By the time we processed a wire transfer
Speaker 1: out of the bank or tried, that was some time
Speaker 1: around four o'clock Pacific, and so that's after basically the
Speaker 1: markets had closed that day. We assumed that it would
Speaker 1: go through first thing Friday morning. The bank went into
Speaker 1: receivership around noon the following day, and that wire basically
Speaker 1: never made it out. So you prepare a wire and
Speaker 1: it doesn't go through, that means your money is stuck.
Speaker 1: What was going through your mind when that happened. So
Speaker 1: we didn't really know that the wire was not going
Speaker 1: through until Friday. When it doesn't go through, I think suddenly, Okay,
Speaker 1: how much money do we have access to? But more importantly,
Speaker 1: everyone started getting very familiar with the FDIC and the
Speaker 1: process of liquidating banks and speculating on you know, is
Speaker 1: it eighty cents on the dollar, is it ninety cents
Speaker 1: on the dollar? Is it ten cents on the dollar?
Speaker 1: The outcomes could go so many different ways that you
Speaker 1: almost don't want to speculate. FDIC, the Federal Deposit Insurance Corporation.
Speaker 1: Did you know this thing existed before last week happened?
Speaker 1: I did know about the work of the FDIC and
Speaker 1: about the protections that they have for banking customers. I
Speaker 1: was not aware of the efficiency with which they work,
Speaker 1: and perhaps of the magnitude of their dedication to people
Speaker 1: and businesses, and so I was pleasantly surprised over the
Speaker 1: weekend to learn more than I already knew about the FDIC. Well,
Speaker 1: pleasant is an interesting way of describing it. You learned
Speaker 1: that you had two hundred and fifty thousand dollars that
Speaker 1: was insured, and you would definitely get that much money,
Speaker 1: but you had a lot more in there, and you
Speaker 1: didn't know what would happen to the rest, right, And
Speaker 1: there's been some discourse in the time since of hey,
Speaker 1: if you knew your money was uninsured, why would you
Speaker 1: leave it in the bank? Right? You know, the FDIC
Speaker 1: will reimburse this two hundred fifty thousand dollars, but why
Speaker 1: anything above that? And that's a fair question I think
Speaker 1: everyone's asking themselves about in hindsight. But I think the
Speaker 1: reality is until a few days ago, bank collapses just
Speaker 1: didn't seem like they were on the horizon, and reputable
Speaker 1: banks like Silicon Valley, you know, especially not So what
Speaker 1: was the weekend like like there was nothing you could
Speaker 1: have done given you money was stuck. But what were
Speaker 1: the discussions you were having with your team, with your investors,
Speaker 1: with any other interesting people that would have helped you.
Speaker 1: It seemed to me the most common conversation, not just
Speaker 1: within our company but among startups like us, was what
Speaker 1: do we do in the short term? Can we make
Speaker 1: payroll next week? And the message that I shared with
Speaker 1: our team is we're relatively fortunate that we can that
Speaker 1: we don't expect to have any short term disruptions in
Speaker 1: that sense. Lots of phone calls, talking with investors, with teammates,
Speaker 1: with family that was impacted, and plotting our way through
Speaker 1: different scenarios, timelines for money to come back, different amounts
Speaker 1: from money to come back. So Sunday afternoon, there's an
Speaker 1: official announcement from the FDIC and other federal bodies saying
Speaker 1: that they will find a way to ensure that depositors
Speaker 1: money will be safe. It's light on details, It's unclear
Speaker 1: what it means for the depositor apart from the fact
Speaker 1: that the money will eventually come to them. Monday comes along.
Speaker 1: What do you do So Monday comes along and we
Speaker 1: have access to all of our funds the insured and uninsured.
Speaker 1: I was amazed at just how quickly that access had
Speaker 1: been restored. We had to make another determine nation, which
Speaker 1: is what's going on in the macroeconomic picture, what's going
Speaker 1: on with banks. We need to make sure that this
Speaker 1: money is safe. So we just said, hey, we need
Speaker 1: this money to be in a fortress at least for
Speaker 1: the time being, and we think the safest place for
Speaker 1: this to go is into sort of the biggest banks possible.
Speaker 1: So the position you ended up taking on Monday is
Speaker 1: different from the one you were contemplating on Thursday, which is,
Speaker 1: if we draw our money out, there'll be a bank
Speaker 1: run and it'll collapse. So maybe we shouldn't do it.
Speaker 1: But Monday comes along and you do decide to take
Speaker 1: your money out. So what made you take that decision
Speaker 1: and not support the bank, which was a moral position
Speaker 1: you would ready to take Thursday morning. Yeah, it's a
Speaker 1: difficult position. The determination on Monday to move that money
Speaker 1: from a regional bank to a large bank is not
Speaker 1: an easy one because I really believe in the value
Speaker 1: of community banks, in regional banks, and I think they
Speaker 1: serve a very valuable purpose in society. But the most
Speaker 1: important thing for me to do is to protect the
Speaker 1: shareholders of the company. And once we saw the bank
Speaker 1: actually go down, that changes things because now you're scared.
Speaker 1: You know. Now it's it's not an abstract game theory calculation,
Speaker 1: it's a real reality after the break. Why was SVB
Speaker 1: so important to startups? And who will fill the gap
Speaker 1: left by the collapse. Let's take a bigger step back
Speaker 1: and tell us when it is that you first became
Speaker 1: a customer of Silicon Valley Bank and why did you
Speaker 1: choose to do it. Sure, you begin working with Silicon
Speaker 1: Valley Bank about a year ago, a little bit less
Speaker 1: than a year ago. And I think it's first important
Speaker 1: to note that Silicon Valley served the communities of the
Speaker 1: broader Bay area. And this is not a startup technology
Speaker 1: entrepreneur bank. This is a bank that folks from all
Speaker 1: walks of life are using for personal and business finance.
Speaker 1: But that being said, speaking as a technology founder, Silicon
Speaker 1: Valley Bank always seem to get startup life in a
Speaker 1: way that other banks maybe would not. What do you
Speaker 1: mean exactly when you say that they understood startup life? Yeah,
Speaker 1: so the profile of a healthy, venture backed, early stage
Speaker 1: technology company looks so different from the profile of other
Speaker 1: types of early stage companies that you might see typically
Speaker 1: outside of the Silicon Valley technology world. Early stage companies
Speaker 1: are typically growing very quickly. There's often a period where
Speaker 1: they're not making a lot of money, and in some
Speaker 1: cases very early on, they're building without even a firm
Speaker 1: knowledge yet of who they're going to sell to. And
Speaker 1: in the bank balance sheet, it's basically looking like a
Speaker 1: big chunk of money comes in and then it's being
Speaker 1: drawn out, drawn out, sometimes very very quickly, because the
Speaker 1: company is going through this growth phase exactly, so it's
Speaker 1: not a weekly deposit of revenue. And I think the
Speaker 1: banks sort of understood that model, and one way in
Speaker 1: which it understood it, or maybe one way in which
Speaker 1: that understanding could be seen, was through their venture debt programs,
Speaker 1: where if an early stage company had raised enough external
Speaker 1: equity capital that effectively de risked the company to some extent.
Speaker 1: Silicon Valley Bank was known for giving loans to these
Speaker 1: early stage companies, and I think being confident giving that
Speaker 1: sort of loan requires you to be in the community
Speaker 1: and to sort of know what's going on on the ground.
Speaker 1: And Noah differentiates a good investment from a bad one.
Speaker 1: CBS Venture Debt program is one of the reasons it
Speaker 1: was so attractive to startups. Most loans offered by banks
Speaker 1: involved some kind of collateral. For example, if you take
Speaker 1: out a mortgage, the house is the collateral until you
Speaker 1: pay off your loan to the bank. Early stage startups
Speaker 1: usually don't have much to offer as a collateral. That's
Speaker 1: what makes ventured at higher risk than most loans, and
Speaker 1: a leap of faith not every bank is willing to take.
Speaker 1: I think it remains to be seen whether this contributed
Speaker 1: to the bank's demise. Frankly, I think the early indications
Speaker 1: are that it did not, that it really had more
Speaker 1: to do with rising interest rates and a general decline
Speaker 1: of venture funding going into the pockets of these companies.
Speaker 1: So I don't want to necessarily say that the bank
Speaker 1: had it all figured out. I think that remains to
Speaker 1: be seen. But I think it made Silicon Valley Bank unique,
Speaker 1: and as a founder, you feel like you have potentially
Speaker 1: someone who who just sort of gets the business that
Speaker 1: you're trying to build. Silicon Valley Bank is a bank
Speaker 1: for many types of startups, but climate tech startups have
Speaker 1: been growing in number, especially in recent years. So if
Speaker 1: we look at it from a climate tech perspective, what
Speaker 1: do you think a collapse of a bank like this
Speaker 1: does to the community. Looking at sector wide, we're at
Speaker 1: a point now where these early stage climate companies have
Speaker 1: many of them have raised a lot of money. We're
Speaker 1: going into an environment where venture capital seems to be
Speaker 1: drying up, and so there's a broad sense that you
Speaker 1: really need to protect that money. You need to hunker
Speaker 1: down and build. And there's some companies who have just
Speaker 1: received giant grants from the Bipartisan Infrastructure Law and the
Speaker 1: Inflation Reduction Act here in the US need to protect
Speaker 1: that money. So I think it's a tough time for
Speaker 1: this to happen. It's always tough, but I think we're
Speaker 1: at a point where that having money in the bank
Speaker 1: is something you don't want to take for granted. Often.
Speaker 1: Thank you so much for taking the time. I should
Speaker 1: note we are talking Monday afternoon, Pacific time. The news
Speaker 1: has certainly been constant about Silicon Valley Bank over the
Speaker 1: past few days, and who knows what comes in the
Speaker 1: next few days. But it is really good to be
Speaker 1: able to get a perspective of what it was to
Speaker 1: be a startup that was dealing with this crisis. Well,
Speaker 1: it's a pleasure to talk with you, and hopefully there
Speaker 1: won't be anything else newsworthy by the time this episode airs.
Speaker 1: So Mark, we are talking on Wednesday, fifteenth March, and
Speaker 1: startups have got their money back. Those deposits ended up
Speaker 1: essentially being insured by the US government. What exactly did
Speaker 1: the government do to get this panic to subside? They
Speaker 1: stepped in to basically guarantee every single depositor, So they
Speaker 1: didn't bail out the shareholders of SVB, but they did
Speaker 1: promise that anyone who had money with the bank it
Speaker 1: would be able to get it out. Yeah, we had
Speaker 1: startups panicking over the weekend, like how are we going
Speaker 1: to pay role on Monday and comparing for all the
Speaker 1: sort of worst case contingency, so that so far seems
Speaker 1: to be avoided. So right now there's this sort of
Speaker 1: complicated dance of trying to sell off the bank potentially
Speaker 1: one piece or different parts, and so someone could take
Speaker 1: over the commercial banking operation, restor B, someone else could
Speaker 1: take over sort of lending operations. They have different kind
Speaker 1: of components and it's likely that they're going to be
Speaker 1: split up and sub had branches in several countries in
Speaker 1: the UK. That was actually purchased outright by HSBC for
Speaker 1: one pound, but we reported the HSBC is injecting at
Speaker 1: least two billion pounds of capital. The same sort of
Speaker 1: situation here where they're guaranteeing that any companies that were
Speaker 1: banking with SVB will continue, You know, it's not necessarily
Speaker 1: going to be. HSBC is a very different bank than SVB,
Speaker 1: so we don't know how here in the UK they'll
Speaker 1: necessarily treat to customers or sort of operate the same way.
Speaker 1: In the past year, because of the financial situation, venture
Speaker 1: capital funding itself has fallen. However, the bright spot was
Speaker 1: climate tech funding, which continued to grow. Does that get
Speaker 1: affected now with what's happened at SVB. Yeah, I think
Speaker 1: they answered for that. We'll take some time, certainly, like
Speaker 1: how well, to see how they sort out the situation
Speaker 1: in the US. I do think there are certainly concerns
Speaker 1: that whatever bank steps in might not look at climate
Speaker 1: tech the same way, might not be willing to make
Speaker 1: as aggressive a loan similar loans, and then how it
Speaker 1: impacts I think the kind of the domino effect it
Speaker 1: has with venture capital when you had a bank like
Speaker 1: SVB being willing to inject its own capital on a
Speaker 1: lot this venture debt. I think that really changed the
Speaker 1: outlook for a lot of the VC firms, and so
Speaker 1: there's a likelihood that could be much more cautious. I
Speaker 1: think a lot of climate tech companies, after they get
Speaker 1: to a certain stage of growth, they still need a
Speaker 1: lot of money to invest in. If you're building a
Speaker 1: something a battery plant or carbon capture facility, that requires
Speaker 1: a lot of capital before you get money from customers
Speaker 1: up front. And that's where SBB I think played a
Speaker 1: very significant role. And that's just an opening question about
Speaker 1: what happens there. So when we go and interview CEOs,
Speaker 1: you know, we don't typically ask them what Wi Fi
Speaker 1: service they use, because why would you There's a Wi
Speaker 1: Fi service, it works, and they do their job unless
Speaker 1: it doesn't. Right, if there was a data breach because
Speaker 1: of the Wi Fi service they use, we will be
Speaker 1: asking CEOs what Wi Fi service do you use? And
Speaker 1: that's kind of the thing that we're going to have
Speaker 1: to do with banks now. You know, we were in
Speaker 1: Paris yesterday looking at climate tech startups and we had
Speaker 1: to ask the question, what are you doing about your
Speaker 1: banking now. And one of the founders of a floating
Speaker 1: solo company told us that she, even though wasn't banking
Speaker 1: with SBB, did have money in some small banks, and
Speaker 1: given what had happened over the last few days, has
Speaker 1: pulled that money out and put it in a big
Speaker 1: bank because that's the flight to safety. That's what she
Speaker 1: feels would be good for her company. But do you
Speaker 1: think that the whole created by SBB's collapse could be
Speaker 1: filled by another bank or many banks providing the different
Speaker 1: services that SBB seemed to provide for startups? I mean,
Speaker 1: I don't think like some of the underlying the situation
Speaker 1: that a lot of these climate companies are operating and
Speaker 1: hasn't really changed, right, Like, there are still ESG targets
Speaker 1: every single company needs to meet, there's still this rushing
Speaker 1: deadline to net zero, and there's still a phenomenal growth opportunity.
Speaker 1: And so I think if you're a bank that's sort
Speaker 1: of operating with just purely sort of financial logic, I
Speaker 1: do see that they could step in. I guess the
Speaker 1: question would be how much of was SEB the climate
Speaker 1: bank because it was willing to because it had this
Speaker 1: network of relationships right across the Silicon Valley and other
Speaker 1: tech sectors. Or was it the Climate Bank because it
Speaker 1: was willing to make bets at other banks didn't make.
Speaker 1: And we're talking at this time where of course all
Speaker 1: of this bank money is private capital, but there's a
Speaker 1: huge amount of government capital that's going to be injected
Speaker 1: into this sector. There's the Inflation Reduction Act in the US,
Speaker 1: there's the Green D in Europe. Does that money become
Speaker 1: more important now that you don't have access to easier
Speaker 1: capital through banks like SBB certainly, like we have already
Speaker 1: seen that the IRA's been implemented in the US right
Speaker 1: there kind of it has immediate impacts on dozens of
Speaker 1: different sectors, and where like just products and financing is
Speaker 1: so much easier for companies to going into the space,
Speaker 1: and we see in Europe companies that are like considering
Speaker 1: making a jump for that reason, and so I think
Speaker 1: those will become much more vital to the company's future,
Speaker 1: particularly if raising money from certain from venture capital or
Speaker 1: in venture data is it's no longer on the table.
Speaker 1: Thanks Mark for your time. Yeah, thanks for having me.
Speaker 1: Svb's collapse is a rapidly evolving story. For all the
Speaker 1: latest coverage, visit bloomboog dot com or read the articles
Speaker 1: we've linked in the show notes. Thanks for listening to Zero.
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