Silicon Valley Bank (SVB) abruptly collapsed on Friday (US time) after a bank run saw many customers withdraw funds, leading to it running out of cash.

SVB was the principal bank for many US technology companies, especially SMEs and start-ups.

We are happy to report that there is no impact on our portfolio companies or overall assets.

SVB was active in providing banking services to New Zealand companies entering the US market. We have met with them on occasion and some portfolio companies use their services.

The collapse of SVB presented three main risks: 

1. Loss of cash from companies, and inability to do business; 
2. Loss of company revenue from customers who bank at SVB; and
3. Collapse in the US banking system due to the flight of capital from smaller banks that are not “too big to fail”.

We were also exposed to a potential collapse in the share market valuation of technology companies. 

No material impact for Punakaiki Fund

Firstly, we checked in with portfolio companies for exposure to SVB over the weekend, and none were materially exposed, while each acted proactively.

Secondly, on Sunday NZ time, the FDIC and US Treasury acted decisively to remove the three main risks—using an elegant approach—neutralising the impact of SVB’s long-term assets being marked down in value, and promising access to cash on Monday US time. This completely restored confidence in the companies.

And thirdly, the share prices of the comparative B2B SasS companies that we track actually increased this week and our overall valuations would essentially be unchanged if marked to market today.

We are happy to see the resilience of the companies, the quick action from the US government, and the overall market response. 

While we will continue to monitor the situation and the markets, we are happy to see the resilience of the companies, the quick action from the US government, and the overall market response, so far.