How Companies Have Protected Themselves From the SVB Collapse

How companies have protected themselves from the SVB collapse

Yesterday, Silicon Valley Bank’s collapse rattled the tech world. This is reportedly the second biggest bank collapse in US history. Silicon Valley Bank has played a significant role in the Silicon Valley ecosystem and has been a preferred banking partner for many startups in the US and around the world.

SVB took a lot of deposits from many ambitious startups during the days of easier funding a couple of years ago and invested the money in long-term bonds with a 1.5% yield. However, as the funding slowed down, SVB has not been receiving enough new deposits to cover their ongoing expenses, including regular withdrawals. Therefore, they needed to sell some of the bonds at a loss, which spooked various prominent Venture Capital Funds and startups which caused a bank run.

The collapse of SVB will no doubt have enormous consequences on the technology sector, and the full extent is not yet known. Unless there is some form of US Government bail-out, many startups will run out of cash and go bankrupt in the upcoming weeks and months.

This is an extremely sad situation for startups who are trying to succeed and may fail due to no fault of their own. The collapse of SVB again highlights that companies which rely on critical technology, they must protect themselves from the unexpected. This is a unique situation where the technology vendors most likely appeared to be in a pretty stable position, well-funded and growing, no one would have imagined a run on a well-established bank causing their own demise.

From a software escrow perspective, what does this mean?

For the customers of the affected startups relying on their technology, it will be imperative to have some sort of exit plan and continuity plan if their technology vendor goes bust.

Software escrow, source code escrow and SaaS Continuity escrow can provide a good level of assurance to the end-customers if the startup company becomes a victim of the SVB collapse.

For SaaS hosted solutions within AWS Microsoft Azure or Google Cloud, SaaS escrow including a replicated environment or a deposit of the access credentials to the production environment will provide almost seamless continuity in the event of the collapse of a startup.

Software escrow or source code escrow including a deposit of the source code and other materials will provide the customer with the basic tools to continue to maintain critical software if the software vendor goes bust.

Escrow London provides software escrow services to thousands of startups globally including a large customer base in Silicon Valley. We really hope that SVB will be bailed out or bought by another larger financial institution. The last thing we want to see is our customers and other startups who are trying to succeed, fall due to this unfortunate situation.

For more information about Escrow London, source code escrow or software escrow, please visit our website.

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