SVB Collapse Was ‘Lehman Moment For Technology’: Goldman Sachs, Marriott

One of the top dealmakers at Goldman Sachs claimed that the bankruptcy of Silicon Valley Bank was a "Lehman moment" for the technology sector.

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The collapse of SVB on March 10 caused its clients to scramble to find out how they would pay their employees, according to Cliff Marriott, co-head of technology, media, and telecoms in Europe for Goldman Sachs' investment banking division.

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According to Marriott, the first weekend "was actually more operational for those companies and it was kind of like a Lehman moment for IT."

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"They required access to funding. They have a large amount of balances on SVB. Additionally, SVB made a large portion of its payroll payments to pay its staff.

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SVB, which was established in 1983, was regarded as a dependable source of money for venture capital firms and tech entrepreneurs. The California-based commercial lender, a division of SVB Financial Group, was once the 16th-largest bank in the nation and the biggest by deposits in Silicon Valley.

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Once its venture capitalist and tech startup clients withdrew billions from their accounts, SVB was taken over by the US government. Numerous VCs have given their portfolio companies the advice to withdraw money out of concern that the lender might fail.

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Assets owned by SVB Financial Group, such as U.S. The value of secure investments like Treasury bills and government-backed mortgage securities fell precipitously as a result of the Fed's aggressive interest rate increases.

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The firm announced earlier this month that it had sold $21 billion in securities at a loss of about $1.8 billion. It also said that it needed to raise $2.25 billion to cover client withdrawal requests and finance additional loans.

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Even though the government ultimately backed up the deposits and the bank's government-appointed CEO made an effort to convince customers that the bank was still open for business, the future of SVB is still unknown.

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Marriott stated that there is "still a large question mark over what bank or firm or combination of firms is going to replace SVB in terms of providing those utility-like services for technology, giving them bank accounts, enabling them to make payroll, storing their cash balances."

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The collapse of SVB has also sparked concerns about possible repercussions for other banks, as SVB is by no means the only institution to have experienced difficulties. In a government-backed, price-cutting arrangement last week, the titan of Swiss investment banking Credit Suisse was saved by its main rival UBS.

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Moreover, Marriott discussed the prediction for 2023 for tech IPOs. Due to a variety of market pressures, including increasing interest rates that make the future cashflows of high-growth IT businesses less alluring, the European tech IPO market has been largely closed.

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Marriott claimed that two weeks earlier, he would have been more upbeat about a rebound in the activity of IT IPOs.

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"I'm still optimistic that 2023 will be a busy year for tech IPOs. And if we don't, 2024 will probably be a major year for IT IPOs, according to Marriott.

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"I believe that what we'll see is that the more well-established successful companies will arrive first, so the simpler business models, profitable organizations, before we see the extremely highly valued profit or negative profit enterprises that we saw in 2021."