The the deal late Sunday night.

The Silicon Valley Bridge Bank 鈥� which SVB became after it fell into receivership 鈥� had approximately $167 billion in total assets as of March 10, the FDIC said in a statement.

First Citizens BancShares鈥� deal includes the purchase of about $72 billion of the bank鈥檚 loans and other assets at a discount of $16.5 billion and $56 billion worth of the bank鈥檚 deposits. Approximately $90 billion in securities and other assets still remain in the receivership.

The 17 branches of Silicon Valley Bridge Bank will open as First鈥揅itizens Bank & Trust Co. today, the FDIC said.

The Raleigh, North Carolina-based bank had earlier been as a suitor, along with .

The sale will bring some closure to one of the most dramatic bank collapses in U.S. history.

A timeline

On March 9, saw its stock price plunge after announcing it would sell $2.25 billion worth of stock 鈥� including $500 million worth of shares to private equity firm 鈥� to shore up its balance sheet.

The announcement led to deep concern around the venture world 鈥� SVB has relationships with more than 50% of all venture-backed companies in the U.S. and countless VC firms 鈥� about the bank鈥檚 liquidity and balance sheet strength and led to a run on withdrawals.

The bank unsuccessfully tried to sell itself and was shut down by banking regulators the following morning.

The bank takeover spread fear in the startup realm as many were left to wonder what would happen to their deposits and if they could do simple things such as meet payroll. However, about 48 hours later, regulators announced a plan to ensure depositors at the bank.

SVB鈥檚 collapse was due to both bad decisions and bad timing. During the recent venture capital boom, the bank was flush with cash as private companies raised huge sums of fresh capital at sky-high valuations. That cash was stuffed into the bank.

However, as the market has slowed with rising interest rates, that cash has dried up as deposits by startups dipped.

At the same time, SVB had decided to invest in long-term, higher-yield bonds. That decision proved disastrous, as when customers started to withdraw cash, the bank had to sell its $21 billion bond portfolio at a $1.8 billion loss.

The bank had hoped its proposed financing would fill that gap, but instead just spooked many of its customers.

A history

SVB was the dominant bank for tech startups and venture debt in the U.S., cultivating a reputation for close-knit relationships with the power brokers of venture and taking chances on young startups that most banks wouldn鈥檛 have the time of day for.

The bank was founded in 1983 by and with an eye toward backing VC-backed companies 鈥� a still relatively new phenomenon at the time. From there it grew, even surviving the California real estate crash in the early 1990s. It provided banking services for up-and-coming tech companies such as and .

Now, after 40 years, startups will have to look somewhere else for their financial needs 鈥� if such a place exists.

SVB wasn鈥檛 just a bank for VC-backed startups 鈥� it was 鈥渢he鈥� bank for such companies. One of the reasons SVB became the bank of choice was its venture lending practice. The bank , with about 20% of that being from venture debt, according to those in the industry.

SVB also had a large private wealth management division that had significant synergies with its commercial banking operations 鈥� helping the same VCs and entrepreneurs with home mortgages and personal loans after it just helped their startup close a big financing round.

The SVB failure is the second-largest bank collapse in U.S. history. The largest collapse of a financial institution was , which fell in 2008.

Related reading:

• Silicon Valley Bank Stock Plunge Sends Jitters Through The Startup World
• Silicon Valley Bank Fails, Is Taken Over By Banking Regulators
• Silicon Valley Bank Collapse Leaves Tech Industry Scrambling For Answers
• Silicon Valley Bank Bet Big On Biotech. And Now It鈥檚 Gone.
• Guaranteeing SVB鈥檚 Deposits Was The Right Thing To Do
• SVB Puts Subsidiaries Up For Sale As HSBC Buys UK Unit
• Silicon Valley Bank鈥檚 Collapse Will Leave A Big Hole In the Startup World
• SVB Kept Up With Fast-Paced Health Startups. The New Normal May Be Slower
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• In Their Own Words: What Silicon Valley Bank Meant To The Valley

Clarification: The original article was updated to reflect the close of the sale.

Companies in the life sciences and health care space relied heavily on SVB, with about 12% of the bank鈥檚 $173 billion in deposits belonging to companies in that sector.听

That鈥檚 because Silicon Valley Bank didn鈥檛 operate like traditional banks 鈥� it matched the fast-paced startup network by being fast and nimble itself. It swiftly supplied startups with loans during periods of high growth. It took on companies that were so novel and innovative they didn鈥檛 have traditional product market fit. Traditional banks were more risk-averse and didn’t understand emerging tech the way SVB did.听

With the loss of SVB, investors worry the startup innovation system may have to slow down to meet its new, slower lenders.听

鈥淚 think lenders will be more conservative in their banking approach with clients, especially ones that are in emerging tech, biotech and life sciences,鈥� said , a biotech investor and managing general partner at .

When COVID hit, SVB moved fast

In 2020, when California issued a stay-at-home order to everyone except essential workers as a result of the pandemic, the private sector took action.

Medtech companies quickly pivoted to meet the surge in demand for testing. Some popped up testing sites on city curbs while others developed easy-to-use scheduling apps. Other companies helped physicians bring their practice into the telehealth age.

Companies in the life sciences moved in to fill gaps in creating therapeutics, vaccine support products and real-time diagnostics.听

鈥淭hose companies expanded,鈥� said , co-managing partner at . 鈥淚n the middle of the pandemic, SVB moved to support these companies at lightning speed in a way that larger institutions simply could not.鈥�

By contrast, traditional banks moved more slowly, taking longer to approve loans for startups. They turned away young founders who didn鈥檛 have a robust credit history. U.S. immigrants, who weren鈥檛 citizens, would have a much harder time banking their company at the larger firms.听聽

鈥淚 think it’s difficult for people to remember how unbelievably conservative mainstream banking was,鈥� Ocko said.听

Biggest losers: emerging technologies

SVB was also a safe haven for startups that were so novel, they didn鈥檛 meet traditional risk assessments that bigger banks used.听

Big banks have a fiduciary responsibility to be conservative about their investments. Many nascent companies, especially in their infancy, don鈥檛 have product market fit as a result of being so new. This was especially crucial for companies in niche and risky industries like biotech, which often take 10 years or more before ever turning a profit.听

鈥淭hey were good at lending in one form or another to two startups pursuing what, to the rest of the world including big banks, would be very arcane, difficult to understand technology,鈥� Ocko said of SVB.听

This is how SVB became the bank of choice for the startup world. With decades of expertise in the tech industry, SVB was better able to understand the risks of these companies. When founded the gut microbiome and at-home diagnostics startup in 2016, he chose SVB as his sole bank at the behest of his investors.

鈥淚n the early days of SVB, they were willing to grant the startup companies that were not profitable,鈥� Jain said. 鈥淢ost traditional banks would only give you a loan when you had assets, or you had profit, whereas SVB was willing to give loans to companies that they thought [were viable].”

Without it, it may become harder for startups in emerging markets to grow.

鈥淚 think there may be an impact on innovation as many companies will have a harder time getting financing, and as a result [may] have to declare insolvency due to a lack of capital,鈥� said Crean. 鈥淥verall, investors will be even more cautious about the sector.鈥�

A drag on innovation

Without SVB, many companies are migrating towards traditional banks.

It鈥檚 hard to tell, materially, how this will impact innovation in the tech sector. SVB quickly provided loans to startups that won defense contracts, or startups that signed partnerships with other companies. SVB quickly allowed companies to open research and development labs, start a manufacturing facility for a new product, or start new projects.

Since other banks move more slowly, companies may have to forgo contract offers if they can鈥檛 get a loan. That will quickly impact when a company will be able to raise its next round of funding, and how much it will get.听

Overall, SVB鈥檚 demise could force Silicon Valley to adjust to a new normal 鈥� one that is slower-paced, matched with that of most banks.

鈥淥ne of the knock-on effects of SVB not being around as an institution is all of that accumulated expertise lived in the people of SVB,鈥� Ocko said. 鈥淭here aren’t binders that a giant bank inherits that tell you step-by-step how to support a radical lifesaving biotech company.鈥�

Related reading:

• Silicon Valley Bank Stock Plunge Sends Jitters Through The Startup World
• Silicon Valley Bank Fails, Is Taken Over By Banking Regulators
• Silicon Valley Bank Collapse Leaves Tech Industry Scrambling For Answers
• Silicon Valley Bank Bet Big On Biotech. And Now It鈥檚 Gone.
• Regulators Announce Plan To Ensure SVB Depositors
• Guaranteeing SVB鈥檚 Deposits Was The Right Thing To Do
• SVB Puts Subsidiaries Up For Sale As HSBC Buys UK Unit
• Silicon Valley Bank’s Collapse Will Leave A Big Hole In the Startup World
• SVB鈥檚 Demise Cools An Already Chilly Climate For Startup Funding
• SVB, Signature Shutdowns Not Chilling Crypto
• In Their Own Words: What Silicon Valley Bank Meant To The Valley聽

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The main concern is whether or not early-stage biotech companies that banked with SVB will be able to access their cash. With no cash flow, nascent pharmaceutical startups rely on their cash reserves to fund drug development.听

SVB was an active pillar in the biotech community 鈥� a regulation-laden industry where companies often spend years and billions of dollars before ever seeing profitability. Per its Q4 2022 earnings report, 12% of the bank鈥檚 $173 billion in deposits belong to the health care and biotech sector.听

The bank鈥檚 failure could have wide-reaching impacts in biotech. Life sciences is already a risky industry to fund 鈥� a drug company can easily spend around a decade and billions of dollars to develop a single product, and many drugs fail.听

Still, as recently as January, SVB was interested in expanding its life sciences business. The bank pointed out in its that the life sciences and health care space was a robust market and worth digging into further.

Biotech spending spree

The bank, in large part thanks to biotech, had already enjoyed a boom in 2020 and 2021 when funding to health care-related sectors flourished. Not only did it provide financial services to nearly half of all tech and life sciences companies in 2022, it boasted large clients that invested in the health care space such as and .听

A few years earlier in 2019, SVB said it would acquire , an investment bank that invested exclusively in the life sciences sector. The acquisition was a huge get for SVB, which had already been investing in the space but now was able to unlock a wealth of regulatory and advisory expertise it had not been privy to.

It was also big news for biotech and health care. Early-stage health care startups had a new avenue to raise money from an investor enthusiastic to grow its footprint in the space. And early-stage biotech companies, as they were nose deep in research and development, had a place to house their reserves.听

SVB spent its next few years leaning further into the life sciences. Per a Q4 2021 earnings report, the financial institution hired another 50 investment bankers in the life sciences space. It called health care a 鈥渞obust market鈥� with a lot of opportunity.听聽

One investor told me the news felt like hearing about a death in the family. 鈥淲e鈥檙e all just trying to figure it out because SVB was such a great company,鈥� the investor said in a text message. 鈥淭hey are a huge lender in the tech, biotech and venture community.鈥澛�

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The bank鈥檚 shares fell more than 60% Thursday, closing around $106 鈥� well off its 52-week high of $597. That led to a broader decline among bank stocks, with the Nasdaq Bank Index falling 8%.

The significant drop led to deep concern around the venture world 鈥� SVB has relationships with more than 50% of all venture-backed companies in the U.S. and countless VC firms 鈥� around the bank鈥檚 liquidity and balance sheet strength.听

On a call with venture capitalists, Silicon Valley Bank CEO told them to 鈥渟tay calm鈥� and that the bank has 鈥渁mple liquidity to support our clients with one exception: If everyone is telling each other SVB is in trouble, that would be a challenge,鈥� according to a .

That same report said New York-based venture firm sent an email to its founders advising them to 鈥渙nly keep minimal funds in cash accounts at SVB,鈥� that is, funds of up to $250,000鈥� and that 鈥淪VB is in a severe cash crisis.鈥�

Thursday鈥檚 dramatic turn came after SVB said it would sell $2.25 billion worth of stock 鈥� including $500 million worth of shares to private equity firm 鈥� to shore up its balance sheet.

鈥淲e are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses,鈥� the bank said in a to shareholders.

Dealing with a changing market

Silicon Valley Bank鈥檚 issues are certainly related to the rocky economy that is being especially felt by the tech and startup sectors.听

During the recent venture capital boom, the bank was flush with cash as private companies raised huge sums of fresh capital at sky-high valuations. That cash was stuffed into banks such as SVB 鈥� a leading institution in the startup and venture world.

However, as the market has slowed with rising interest rates, that cash has dried up as deposits by startups have dipped amidst a drop in venture funding even they continue to burn cash.

In a to investors, SVB said client cash burn 鈥渞emains about 2x higher than pre-2021 levels and has not adjusted to the slower fundraising environment,鈥� seemingly illustrating that startups have not reversed their previous patterns of spending.

The bank said it expects cash burn to remain elevated for the first half of the year and expects venture investment in the U.S. to be down about $120 billion to $140 billion this year.

That issue is coupled with the fact that during the high times in venture, SVB made the decision to invest in low-yield securities 鈥� which produce little return, especially when viewed in unison with rising interest rates.

The bank has now sold $21 billion of its securities portfolio, which produced an after-tax loss of $1.8 billion in Q1.

Too big to fail?

The 40-year-old banking titan has become synonymous with tech startups and the valley over the decades.

SVB held $212 billion in assets and $342 billion in total client assets as of the end of last year.听

The bank鈥檚 venture capital/debt-focused arm 鈥� SVB Capital 鈥� has worked with more than 760 unicorns over the years and as of mid-2022 had $8.8 billion assets under management.

SVB鈥檚 rolodex of venture firms it does business with is a who鈥檚 who of money in the valley 鈥� with names such as , and among the most prominent.

According to data pulled from 小蓝视频色情网页版, the bank participated in 75 founding rounds last year 鈥� mainly involving venture debt 鈥� that totaled $5.7 billion. That included leading a $200 million venture debt round for San Jose-based .

That deal number is likely low, as many private companies do not publicly divulge debt financings 鈥� but nevertheless shows how intertwined the bank has become to the tech startup ecosystem.

In 2021, SVB took part in 73 rounds that totaled $3.1 billion, per 小蓝视频色情网页版.听

Thus far this year, the bank has participated in eight announced rounds, including leading a $30 million debt round for San Francisco-based .

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Enter , which this morning announced it raised $6 million in seed funding led by .

, and founded Pipe in September 2019. Their goal is to offer SaaS companies a way to grow without diluting their current cap table.

Pipe claims it does this by offering an instant cash advance against the full annual value of a company’s software subscriptions. So basically, according to co-CEO Hurst, it turns monthly recurring revenue into annual recurring revenue.

鈥淲e built this for SaaS companies because they, in particular, benefit from immediate payment,鈥� he wrote via email. 鈥淲ith Pipe, they don’t need to discount revenues to entice customers to prepay.鈥�

, , 听贵辞耻苍诲别谤听, General Counsel , , and also participated in the round. (There’s been a recent trend of startup founders investing in other startups as of late, such as in the case of Front, which we wrote about here.)

The premise behind the Los Angeles-based company was appealing to , co-founder and general partner at Craft Ventures. Historically, he said, the main financing option for SaaS companies has been dilutive equity rounds.

鈥淧ipe is the tool every SaaS founder has been waiting for,鈥� he said in a written statement. 鈥淚t allows SaaS companies to grow without dilution by financing their SaaS receivables.鈥�

How it works

Pipe says it is addressing a (as of 2018), which is growing by double-digit percentages year over year.

The Pipe鈥檚 platform assesses a customer’s key metrics by integrating with its accounting, billing and subscription management systems. It then makes 鈥渁n instant decision on whether the company qualifies for a PipeLine of finance.鈥� Facilities range from $10,000 per month to several million dollars per month for later-stage companies.

I was curious as to how Pipe could provide such facilities with just $6 million in seed funding. Hurst told me the company is also聽backed by debt providers (such as ) to be able to provide the facilities to its customers. But he emphasizes that Pipe is “not providing debt,” and is “not a loan.”

CEO said his SaaS company has risked losing deals in the past by requiring annual upfront payments when customers wanted to pay monthly.

鈥淧ipe solves this for us and allows us to invest more heavily into our growth,鈥� he said. 鈥淚t may easily save us a fundraise.鈥欌��

Pipe has only officially been in the market for a few weeks but Hurst said it鈥檚 been 鈥済rowing 100 percent week-over-week during beta.鈥� The company is officially launching out of beta today.

The six-person company plans to use its first round of funding to expand its sales and engineering teams out of its L.A. headquarters and in San Francisco and Phoenix. But looking ahead, the company considers what it鈥檚 doing 鈥渁s a global opportunity.鈥�

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