Every entrepreneur in the world dreams of succeeding in Silicon Valley, a synonym for tech and innovation. And every investor dreams of being a backer of Silicon Valley’s most successful startups.
Having given birth to many of the most valuable technology brands in the United States, Silicon Valley has been at the center, both as a brand and as a lifestyle, for the last 20 years.
It has been the birthplace of the entrepreneurial lifestyle, which can be observed across the world, including in Türkiye.
The most valuable fuel for every entrepreneur’s growth dream recently has been not only money, but Silicon Valley Bank (SVB), the network it was providing and the fact it served as a chummy club of innovation.
Its last week shocking collapse, yet, was caused by the hypocrisy of the United States.
A major lender for startups, the bank was taken over by Federal Deposit Insurance Corporation (FDIC) after its crash crippled stocks and triggered concerns of contagion throughout global markets.
The government moved to guarantee all the deposits, and regulators are trying to find a buyer for the bank.
Until a problem arises, the collapse of every bank in the U.S. is considered a result of the market. However, SVB's fall was not allowed due to its brand and relationship network, rather than it being just a bank.
In 2016, when former President Barack Obama met with 700 entrepreneurs from around the world at the Stanford University campus, he was accompanied by the founder and CEO of Meta, Mark Zuckerberg, and three other entrepreneurs. He marketed the American dream to entrepreneurs worldwide with the scenario that every entrepreneur dreamed of.
SVB was the most active bank in those meetings. Small as a bank but big as a brand and network, the large institution was not allowed to default.
Initially, a classic financial institution reaction was seen, with an emphasis on remaining calm because it was not big enough to allow a collapse. They tried to prevent the fire from spreading by providing examples of financial institutions that collapsed every year in the U.S. However, the bank's relationship network and brand value caused an impact as significant as a big bank.
Silicon Valley Bank served the world of entrepreneurs and investors. It was not just a bank but the first definition of smart money. Although it carried the name Silicon, SVB maintained the basic codes of investment for people and entrepreneurs.
Future brands in many areas, from artificial intelligence to finance technology, from cybersecurity to e-commerce, will continue to emerge from this relationship network.
Many ventures that generate income and investments in Türkiye through the U.S. are feeling the impact of SVB.
Although there may be cash flow problems, the crisis has been temporarily averted in terms of continuity. Startups that plan to burn cash will have to postpone their dreams for a while. Therefore, financial markets will have to take into account not only balance sheets but also the impact all this will create.
Ali Karabey, a founding partner of 212 and one of the most experienced investors in Türkiye’s entrepreneurial ecosystem, said Silicon Valley Bank was more than just a bank.
He summarized the impact of the institution that he says has been making the right matches for almost 50 years.
“Silicon Valley Bank was more than just a bank for us. Since 212's first investment in 2012, it has contributed to our ventures meeting American venture capital, angel investors, and mentors by providing significant support for the growth of many of our partners abroad,” Karabey said.
“SVB provided significant advantages by doing more than just opening bank accounts for newly established companies abroad.”
The institution played a critical role in introducing new companies to international markets and helping them gain global experience, he noted.
He said SVB had an extensive network of clients and partners, from the startup ecosystem to public companies, and served as a partner and an investor.
“In addition to providing seminars to startups in many fields, SVB offered support for non-capital instruments, such as venture debt, for those operating in international markets and introduced ventures to different players,” he added.
“I am deeply saddened by SVB's setback, which has made a significant contribution to Türkiye's entrepreneurial ecosystem stepping into foreign markets.”As the technology industry boomed, increased deposits were channeled into investments by U.S. and global markets that paid low interest rates at the time.
So, just as the behavioral changes brought about by remote work and e-commerce were advantageous to technology ventures during the coronavirus pandemic, rising interest rates later caused a shift in the behavior of capital owners.
When the U.S. Federal Reserve (Fed) began raising rates last year, venture capital sources began to dry up, causing newcomers to burn less cash. To offset the accelerated withdrawals, SVB was forced to sell some of its government bonds at a large loss because the yields on new bonds were much higher.
Let's look at the process from the collapse of SVB to the announcement by U.S. President Joe Biden. In fact, companies that only conduct market analysis do not show you the full picture of the situation a firm is experiencing. Now let's see who will pay the price. While preparing for a global fight, the U.S. showed that it could not afford to destroy the most valuable dreams by issuing a call to return the money.
