Bloomberg estimated the losses of the venture capital market due to the collapse of SVB

Silicon Valley Bank went bankrupt in early March, after which the capitalization of the banking sector in the United States sharply decreased, Europe and Asia. BLOOMBERG writes,

The $2 trillion venture capital industry could face 25-30% or $500 million in portfolio write-offs due to the collapse of US Silicon Valley Bank (SVB), analysts at Bloomberg Intelligence have calculated.

“After the collapse of the SVB, we expect more rigorous valuation and disclosures, especially since these markets have seen most of the “fiduciary” capital from pension funds flow into these markets – and, unlike endowments and family offices, there is no room for expansion and pretense. Bloomberg analyst Gaurav Patankar said.

He explained that the "expansion" and "pretend" policy that some venture capitalists use involves holding onto assets and supporting capital to avoid revealing their true value. Examples of this include net worth loans, which allow partners to borrow from a pool of portfolio companies within a fund, and the sale of assets from a managed fund to a new fund through private borrowing. “But these methods can only delay, but not solve the main fundamental problem of “failure” and “unrealistic” venture valuations,” Patankar said.

Venture capital (English venture - risky) - the capital of investors intended to finance new, growing or struggling for a place in the market of enterprises and firms (startups). Unlike classical investments (which involve a return of funds), the venture financing model includes the probability of losing investments in each specific company, while profitability is achieved due to the high return on the most successful investments.

In March, three US banks with $333 billion in assets closed within one week, including Silicon Valley Bank (SVB). The bank ranked 16th in terms of assets in the country (at the end of 2022, assets amounted to $211.8 billion, of which $120.1 billion were investments in securities, $73.6 billion were loans issued). In 2022, it was estimated at $40 billion.

After the collapse of the SVB, US President Joe Biden said that nothing threatened the country's banking system. Despite this, Moody's changed its outlook from stable to negative.

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The bankruptcy of credit institutions led to a drop in the capitalization of the banking sector in the US, Europe and Asia, as well as liquidity problems for some players. In particular, the Swiss Credit Suisse was forced to request a $54 billion loan from the Swiss NATIONAL BANK to stabilize the situation, but this did not stop the outflow of deposits. Subsequently, the bank was acquired at a deep discount by its competitor UBS, the deal was supported by the Swiss regulator.