Silicon Valley Bank’s Deep Ties to the Tech Industry

One described a cocktail hour mixer in which he was introduced to an SVB banker who could provide a loan to his start-up once he graduated from Y Combinator’s program. Six months later, when he needed a loan to buy his first home, he went to SVB. The bank looked at his company’s valuation, based on the money it had raised in its first round of funding, and spoke to investors of his company. It granted a loan after two other banks turned him down, he said.

SVB’s home loans were significantly better than those from traditional banks, four people who received them said. The loans were $2.5 million to $6 million, with interest rates under 2.6 percent. Other banks had turned them down or, when given quotes for interest rates, offered over 3 percent, the people said.

Drive Capital, a venture firm in Columbus, Ohio, banked with SVB and had lines of credit with the bank that allowed it to wire money to its start-ups faster than asking its own backers to send the money for each individual deal. SVB also invested in Drive Capital’s first fund and in two of its portfolio companies. In total, a third of Drive Capital’s portfolio used SVB’s banking services, which included venture debt, a specialized kind of credit for venture-backed start-ups.

“If you’re a venture capitalist or start-up company, it’s fair to say in some way, shape or form, SVB touched every part of your business,” Chris Olsen, an investor at Drive Capital, said.

Article source: https://www.nytimes.com/2023/03/17/technology/svb-tech-start-ups.html