A prominent venture capitalist has attributed the downfall of Silicon Valley Bank (SVB) to a banking crisis rather than any issues within the technology sector. Anne Glover, CEO and co-founder of Amadeus Capital, expressed her belief that the SVB crisis resulted from “utterly irresponsible” practices by the bank’s management. Glover explained that SVB engaged in the reckless activity of accepting short-term deposits from venture capitalists and then investing those funds in long-maturity debt.
Irresponsible Decisions by SVB Management
During a tech investor showcase in East London, Glover criticized the actions of SVB’s senior management in California, labeling their behavior as “unbelievably irresponsible.” SVB was eventually shut down and taken over by the U.S. government following a mass withdrawal of funds by startups and venture capitalists who were concerned about the bank’s financial health. Prior to its closure, SVB attempted to raise $2.25 billion in capital to address a $1.8 billion deficit in its balance sheet, which had arisen due to the sale of $21 billion worth of bonds at a loss. The bank had been a vital component of the tech industry, providing financing for companies that were often rejected by traditional banks.
Consequences for the Tech Community
Glover pointed out that SVB’s mismanagement negatively impacted the technology community. The bank’s decision to invest venture capitalist deposits into first-year mortgage bonds without hedging against interest rate fluctuations was a significant failure in basic banking practices. In the United Kingdom, SVB’s branch was sold to HSBC for £1 as part of a government and Bank of England-brokered deal that secured £6.7 billion ($8.3 billion) in deposits. As a non-executive director on the Bank of England’s board, Glover commended the central bank for its successful resolution of the situation in the UK, which she considered superior to the US response.
The wider banking industry has faced considerable pressure due to rising interest rates, which have made debt more expensive. Although increased interest rates can make lending more profitable for banks, they also hold government bonds on their balance sheets that decrease in value when interest rates rise. Credit Suisse is a notable example of a bank that has experienced significant difficulties, having been rescued by rival lender UBS through a Swiss government-coordinated, cut-price deal.
Anne Glover, an experienced tech investor, co-founded Amadeus Capital in 1997 alongside Hermann Hauser, who played a crucial role in developing the first Arm processor. Prior to Amadeus, Glover worked on the investment team at Apax Partners & Company Ventures.
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