Listen to this articleNoam Galai/Getty Images for TechCrunch
- Union Square Ventures warned portfolio firms in November to diversify their financial institution deposits.
- The warning, which has not been beforehand reported, by no means particularly talked about SVB.
- But it got here after a senior associate turned alarmed after studying SVB’s monetary statements.
When a senior Union Square Ventures associate was finding out Silicon Valley Bank’s monetary statements last November he turned so alarmed by the financial institution’s monetary situation that he issued an pressing plea to his companions: Alert each one of many agency’s portfolio firms to diversify their financial institution deposits and never be concentrated in anybody establishment.
The warning, which has not been beforehand reported, by no means particularly talked about SVB. But it gave USV founders a prophetic message 4 months before the financial institution was shut down by federal regulators last week, sparking a banking disaster not seen because the Global Financial Crisis, in keeping with two sources with direct knowledge of the matter who weren’t approved to talk publicly.
“If you read the SVB financial statements, which most people don’t do, you could see an impending liquidity crisis,” said one source. “A liquidity crisis was quite significant and real.”
USV’s early message to founders illustrates how the warning indicators have been there that have been missed by regulators, auditors, ranking businesses, and most different enterprise corporations.
It also shows how USV —an early backer of Robinhood, Coinbase, and Etsy — has been way forward of different corporations not only in savvy early bets on startups, however its prescient recommendation to portfolio firms.
Insider reported earlier this year that USV has delivered near a 60% annual return, excluding charges, to considered one of its main backers, UTIMCO, which manages the $65 billion endowments of the University of Texas and Texas A&M programs — placing it in a league of its own amongst enterprise corporations.
Venture funding agency Greenoaks Capital Partners also warned its startup founders of potential issues at SVB last November, Bloomberg reported. In December, a New York banker at a big monetary establishment began getting calls from present Silicon Valley Bank startup founders asking to open accounts, Insider beforehand reported. The entrepreneurs wished to change after being told by their enterprise buyers that SVB was affected by “liquidity issues.”
Founders Fund, the enterprise agency based by billionaire Peter Thiel that backed Facebook and Airbnb, has been broadly criticized for sparking a financial institution run last Thursday morning, after it warned founders to maneuver their cash out of SVB.
But Neil Ruthven, chief monetary officer of Founders Fund, defended the agency as doing nothing more than defending its buyers’ cash.
“Thursday morning it was clear we were in the middle of a bank run, and we reacted in line with our fiduciary duties,” he said in an announcement to Axios.
