Tech Sector Faces 'Historic Black Eye Moment:' Analyst Sees 'Major Ripple Impacts' Following SVB Implosion

Zinger Key Points
  • Ives sees SVB fiasco altering the tech start-up community, having both near- and long-term consequences.
  • Startups may be forced to cut costs due to the tighter overall funding environment, he says.

Following SVB Financial Group SVB-owned Silicon Valley Bank’s collapse, a veteran tech analyst took stock of the impact it can have on the tech sector.

Historic Black Eye Moment: SVB has been an integral part of the venture capital and tech startup community for decades, serving as a key artery for the Silicon Valley tech ecosystem, Wedbush analyst Daniel Ives said in a note. Tech companies have a heavy presence within SVB’s asset base, with many startups having their cash and credit lines or venture capital debt financing with the bank, he noted.

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SVB’s "historical black eye moment” has short- and long-term consequences for the tech sector, the analyst said. He sees the development altering the tech start-up community.

Outside of Roku Inc. ROKU and a handful of others, there could be only a negligible impact on the cash balances of public tech players, Ives said. The bigger and more troubling story is how this will change the start-up and VC community going forward, he added.

Tech Startups To Feel The Pinch: “While the emergency Fed announcement tonight clearly backstops the SVB funds and takes uncertainty off the table, the impact from this past week will have major ripple impacts across the tech landscape and Silicon Valley for years to come in our opinion,” Ives said.

While public tech companies are well diversified in their banking relationships, private companies with lines of credit were required to consolidate their deposits with SVB, the analyst noted.

“For tech startups ultimately with higher cash burns and a more uncertain environment on the horizon and most importantly SVB a debacle for the ages, the hurdle for bank loans and other forms of debt financing will be a different world going forward,” Ives said.

The tighter overall funding environment, the analyst said, will increase pressure on many startups to cut costs.

Read Next: Bill Ackman Says Government Response To SVB Collapse Not Bailout: 'People Who Screwed Up Will Bear The Consequences'

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