- Version 1.0.
- Download 162
- File Size 597Kb
- Create Date March 24, 2023
- Commentary: Entrepreneurial Learning's from the Collapse of the Silicon Valley Bank
Key startup and scaleup learning's from the collapse of SVB - A seven-point checklist
The root-cause of the demise of Silicon Valley Bank (SVB) goes back several years. SVB invested billions in US government bonds during the era of low-interest rates; however, this seemingly secure strategic decision proved to be a mistake when the Federal Reserve began to rapidly increase interest rates to combat inflation. As a result, the increase in rates caused the value of SVB's bond portfolio to decline, yielding an average return of 1.79% week prior to SVB’s collapse, compared to the 10-year Treasury yield of around 3.9% at the time. These higher rates caused tech startups to spend more money paying off debt rather than acquiring new venture capital. This eventually led startups and scaleups to pull deposits from SVB in massive amounts to finance their operations and development.
While the collapse of SVB offers many key learning’s for the finance industry as whole, such as 1) adopting and updating proactive risk management strategies in use, 2) improving data-driven decision-making capabilities, and 3) differentiating between short-term and long-term business strategies, it is equally important to highlight the key learning’s for startup and scaleup businesses.
In our Commentary, “Entrepreneurial Learning’s from the Collapse of the Silicon Valley Bank”, Jari H. Helenius, underlines seven key factors that the startup community should address in their corporate and business financial planning moving forward.
Download the commentary using "Commentary: Entrepreneurial Learning's from the Collapse of the Silicon Valley Bank" button above to read more.