The Federal Deposit Insurance Corp. is reportedly easing deposit requirements for startups that have venture debt lines at Silicon Valley Bridge Bank N.A.
Silicon Valley Bank, the bridge bank's predecessor, which the FDIC seized and now operates as the bridge bank, required venture debt customers to have 100% of their capital at the bank. Under the new rules, those customers only have to commit to to keep half their capital at the bank, according to PitchBook Data.
That's in line with the amount of capital that a group of venture firms last week urged their portfolio companies keep at the bank in the wake of its seizure. And it addresses a key concern that cropped up in the immediate aftermath of SVB's collapse — the ability of startups and other companies that had all their money on deposit with the bank to access their capital to address their operational needs.
"If you had 100% of your money at Silicon Valley Bank, you couldn't make payroll," Noah Breslow, a partner with Bain Capital Ventures, told PitchBook. "If you have at 50% somewhere else," he continued, "you wouldn't have the same drama."
The new rules are part of the FDIC's efforts to preserve the value of the bank, now run by CEO Tim Mayopoulos, while it tries to attract buyers, PitchBook reported.
Some venture debt advisors are advising companies to stick with SVB, particularly after the new rules. Other banks have become more choosy about lending to venture-backed companies. And now those companies that are SVB customers can spread around their deposits and hedge their bets, they said.
"The capital at SVB is fairly cheap," David Spreng, CEO at Chicago-based venture debt firm Runway Growth Capital, told PitchBook. "I think there might be a challenge to replicate it with another early-stage lender."
Here's more Bay Area venture and startup news at the start of a new week:
Fundings
- Switch Therapeutics Inc., South San Francisco, $52 million, Series A: Insight Partners and UCB Ventures led the round for this developer of gene-based treatments for central nervous system diseases. Upfront Ventures, Bold Capital Partners, Eli Lilly and Company, Ono Venture Investment, Digitalis Ventures, Dolby Family Ventures, Free Flow Ventures and PhiFund Ventures also invested.
- Illumix Inc., Redwood City, $18 million, Series A: LightShed Ventures, KKR & Co. co-founder Henry Kravis, Epyllion CEO Matthew Ball, Maveron, Lightspeed, Mark Cuban, Sony Innovation Fund, RW3 Ventures, OV, Visible Ventures and Xavier Niel all invested in this provider of software for creating augmented reality experiences.
M&A
- Karat Inc. acquired Triplebyte's skill assessment service and team for an undisclosed amount. Based in Seattle, Karat offers a job interviewing service for technical roles. San Francisco-based Triplebyte, legally known as Salus Labs Inc., offered a job listing board in addition to its assessment service. It plans to shut down its job board March 31.
Funders in the news
- Emerson Collective added Gabe Kleinman as an operating partner on its venture capital team. Prior to joining the Palo Alto investment firm, Kleinman worked in founder solutions and market for San Francisco venture firm Obvious Ventures.
