March 14, 2023
The recent collapse of Silicon Valley Bank (SVB) has caused concern throughout the NFT community and the broader tech industry, leaving members to wonder how the failure will impact their favorite NFT projects and their respective treasuries. In this article, we take a closer look at the situation, how various crypto companies have responded, and what this means for the industry.
Silicon Valley Bank, which holds approximately $174 billion in deposits, was closed on 11/03/23 due to a lack of funds. Depositors were worried about their money that was kept in the bank, especially businesses that had hundreds or thousands of employees, which meant they had to keep a lot of cash in reserves.
However, on March 13, the government announced that it would bail out the depositors and make all the depositors whole, ensuring that no money will be lost. Signature Bank in New York will also have a similar exception, with all depositors being made whole, and shareholders and certain unsecured debt holders not being protected.
A number of cryptocurrency companies have stated that they have connections to the bank and have assured their customers that their operations will continue as normal. Lucky Trader has put together a list of NFT projects and creators who have been forthcoming about their project finances. It is worth noting that this data is not available on-chain, and Lucky Trader is unable to verify these statements independently.
Yuga Labs' Co-Founder Garga has reassured the community that the company has "super limited exposure" to the now-failed bank, demonstrating the company's commitment to financial security and its ability to navigate any financial challenges that may arise.
Azuki and 0N1 Force have reported that they have limited involvement with SVB and do not anticipate any impact on their operations. PROOF has informed its stakeholders that it previously held cash with SVB, but has since diversified its assets into ETH, stablecoins, and fiat currencies. This has contributed to the company's financial and operational stability.
As per the statement, Pudgy Penguins remained unaffected by the SVB incident, while DeLabs had no exposure to SVB. Dapper Labs, which oversees NBA Top Shot and NFL ALL DAY, had only a limited amount of cash with SVB, and the issue involving SVB did not have a considerable impact on them.
Many other NFT projects, such as Cool Cats, Chimpers, Floor, Gutter Cat Gang, Knights of Degen, Limit Break, LinksDAO, Llamaverse, OnChainMonkey (Metagood), Overlord (Creepz), Pixel Vault, Sappy Seals, VeeFriends, Wilder World/Zero Tech, World of Women, and many more have not been impacted by SVB in any way, and their funds remain secure.
While the fallout from Silicon Valley Bank failure has had a significant impact on the crypto and tech industries, causing widespread concern over the financial stability of many companies, it is clear that many crypto companies have been proactive in addressing the situation and ensuring the safety of their funds. The situation underscores the importance of diversification and proactive communication, and it is likely that many companies will learn from this experience and take steps to strengthen their financial security in the future.
A venture capitalist stressed the importance of diversifying risk for portfolio companies that use Silicon Valley Bank (SVB), especially for early and mid-stage companies. In an interview, they explained that late-stage companies tend to think about diversifying their partners and risk, and they may work with larger banks like JP Morgan or City Bank.
Early and mid-stage companies are likely to be most affected, as they may struggle to access payroll and face a shortage of available capital. To mitigate this risk, the interviewee recommended setting up these companies with other lenders that can underwrite them, potentially through bridge loans or equity investments. However, the interviewee warned about the possibility of predatory lending and the need for fiduciaries to prevent it.
Regarding available options, the interviewee mentioned some larger banks and smaller startups that may be worth considering. They also pointed out that the situation could get worse over the next 12 to 16 months as more companies require capital, and the need for capital will continue to grow.
While the situation is still unfolding, it is important to consider the potential long-term impact of the collapse of Silicon Valley Bank on the tech and NFT crypto industries. The fallout has raised concerns over the financial stability of many companies, particularly early and mid-stage ones.
It underscores the importance of diversification and proactive communication, and many companies will likely learn from this experience and take steps to strengthen their financial security in the future.As more companies require capital in the coming months, it will be essential to explore available options and take proactive steps to ensure financial stability.