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Silicon Valley Bank Closure: What Does It Mean For MSPs?

SANTA CLARA, CALIFORNIA – MARCH 10: A Brinks armored truck sits parked in front of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corporation. Prior to be...

A lot has changed since we first reported on Friday that it looked like major technology lender Silicon Valley Bank (SVB) was in trouble. Later that same day on Friday, March 10, the U.S. Federal Deposit Insurance Corporation shut down SVB. While the first $250K of deposits in any given account are insured, that amount wouldn’t even cover a single executive annual salary in many cases. Access to funds in excess of $250K were in question. Concerns arose about whether tech startups would be able to make their payrolls this week and, if not, whether mass layoffs were on the way.

SVB is the bank of many private equity and venture capital companies that fund technology companies, including Insight Partners, Bain Capital, and Lightspeed. Insight Partners owns managed services platform provider Kaseya. Over the weekend, Kaseya partners were active on Reddit, wondering about the impact of the SVB closure on Kaseya.

Will SVB's Closure Impact MSPs?

We reached out to Kaseya over the weekend and a company spokesperson said: “Kaseya doesn’t anticipate a material direct impact from the current situation related to Silicon Valley Bank.” That's great news for MSPs who use the platform.

On Sunday, March 12, the U.S. Treasury, U.S. Federal Reserve, and FDIC issued a joint statement that quelled panic and should ease concerns about companies funded by venture capital firms and private equity firms that banked with SVB. The statement said:

Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

In addition to the SVB closure, Signature Bank in New York was also closed on Sunday. Signature Bank reportedly had heavy involvement with cryptocurrencies. 

While the short-term emergency appears to be over for tech companies concerned about the availability of their deposits in these banks, shock waves from these two bank failures will reverberate for some time. Will these closures impact rising interest rates? There's been plenty of speculation on both sides of that question over the weekend. Right now the smartest guess seems to be that these events could slow down rate increases. But this is a rapidly changing situation.

Will SVB's Closure Impact VC and PE Funding?

What about venture capital and private equity funding. Will the SVB events change the funding environment for entrepreneurs? Technology industry analyst Hyoun Park offered this perspective on a post on LinkedIn:

"Although SVB will survive in some form, it’s hard to imagine the successor being as founder friendly as SVB for venture debt or the flexibility the bank showed in COVID. Larger banks won’t cut the same slack because they don’t need to or want to. This is a loss for entrepreneurship, especially as it has happened before VC tech funding has opened up to minorities. Going forward, this is yet another challenge newly funded companies will have in finding cash compared to the SVB days."

Jessica C. Davis

Jessica C. Davis is editorial director of CyberRisk Alliance’s channel brands, MSSP Alert, MSSP Alert Live, and ChannelE2E. She has spent a career as a journalist and editor covering the intersection of business and technology including chips, software, the cloud, AI, and cybersecurity. She previously served as editor in chief of Channel Insider and later of MSP Mentor where she was one of the original editors running the MSP 501.