The collapse of Silicon Valley Bank will spark a wave of tech mergers as funding opportunities dry up for risky startup companies, Wedbush says

Silicon Valley Bank employees react to the bank’s collapse

The collapse of Silicon Valley Bank will spark a wave of tech mergers, according to Wedbush.
SVB played an integral role in providing startup funds to companies that would be denied by typical banks.
Tech M&A will be up 20% in 2023 from a year ago, and some startups could hasten IPOs, Wedbush said.

One ramification of the Silicon Valley Bank collapse is more technology mergers, according to a Tuesday note from Wedbush analyst Dan Ives.

Silicon Valley Bank played a crucial role in providing funding to risky technology startup companies that would be denied from typical commercial banks. With the bank now fully collapsed and given the likelihood that lending standards across all banks will get tighter, it means a key source of funding has dried up for tech startups.

“SVB is the hearts and lungs of the tech startup world and had its tentacles in one way or another across the early and late stage tech landscape especially since the burst,” Ives explained. “When others left the Valley in 2001/2002, SVB was the bedrock and played an instrumental role in the thousands of successful tech startups seen over the years.”

The bank made it very easy for profitless and speculative tech companies to receive lines of credit and venture debt terms. But that’s over after SVB was taken over by the FDIC last week as a big mismatch between its duration of assets and liabilities helped spark a bank run.

“Now startups face the arduous task of getting loans and banking relationships with large money center banks or other regionals that will greatly scrutinize funding with a lab microscope,” Ives said.

But startups have another funding option that will likely return in a big way this year, especially as tech valuations for small …read more

Source:: Businessinsider

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