Three days into his tenure as Silicon Valley Bank‘s government-appointed CEO, Tim Mayopoulos has a message for his high-powered enterprise capital and startup clients: Bring your a reimbursement.
That was consistent throughout Mayopoulos’ responses as he fielded over 400 questions from concerned clients on a 30-minute Zoom call Wednesday.
“There is no such thing as a safer place within the U.S. banking system to place your deposits,” Mayopoulos said on the decision, which CNBC attended and was first to report. He urged clients to return their funds to the bank and to promptly alert their relationship teams of any issues with inbound or outbound wire transfers, a degree of concern for a lot of corporate executives who were unable to drag their deposits from the bank last week.
Mayopoulos was joined by SVB operating chief Phil Cox, the one remaining executive from the core C-suite team. SVB’s former CEO and CFO aren’t any longer employed by the bank, Mayopoulos said on the decision.
While Mayopoulos is making his pleas to current and former clients, it is not clear how long he’ll stay in his current job because the bank is currently controlled by the Federal Deposit Insurance Corporation. Mayopoulos said he doesn’t know what SVB’s “exact end state” would appear like, and he listed three possibilities: recapitalization, sale, or liquidation.
A recapitalization would allow SVB to live on as a standalone entity. But that possibility is determined by one other financial institution or group of investors stepping up.
“I recognize I’m latest on the scene,” Mayopoulos said in direct response to concerns from enterprise capital firms. “You’ve got been patient with us as we have passed through a few of those operational difficulties. All I’d ask is give us a likelihood to win back your trust and confidence.”
Mayopoulos’ pitch was tailored towards the enterprise investors which have taken to social media in droves to precise shock and dismay on the collapse of a storied Silicon Valley institution. On the decision, Mayopoulos repeatedly referred to the “innovation economy,” and to a startup ecosystem through which “Silicon Valley has played a vital part.”
Customer feedback will probably be critical in determining the longer term of the bank, Mayopoulos said on the decision. Input “from clients and from the enterprise capital and entrepreneurial community” would shape the timetable for SVB’s ultimate emergence from government control.
“One among the things I need to convey to you is that you will have some agency on this that you simply actually get to vote, not less than to send clear signals about what you would like the final result of this process to be,” the CEO said in his prepared remarks. “If our clients decide to take their deposits and keep them in other institutions, that clearly limits the range of options that now we have when it comes to the last word final result.”
SVB’s longstanding relationship with Silicon Valley’s most elite enterprise firms is mutually helpful and symbiotic.
From its founding at a poker table until the nearly fatal bank run last week, SVB was focused on taking risks in a market that the majority traditional banks shunned. SVB found a distinct segment in enterprise debt, funding corporations that needed money infusions, especially between funding rounds.
In exchange for future consideration, often equity or warrants in an organization, SVB became a mammoth player within the enterprise debt space, extending from software and web into life sciences and robotics.
In its over 40 of business, SVB grew together with its depositors, constructing out a lucrative mortgage business and a set of private-banking products that allowed it to retain and charm the founders whose fortunes the bank helped create.
From legacy enterprises like Cisco to more modern tech corporations reminiscent of DocuSign and Roku, SVB has focused on providing financing and banking services at every stage of growth.
“There are other places that do enterprise debt, but Silicon Valley Bank was the 1,000-pound gorilla within the room,” said Ami Kassar, CEO of the business lending consultant Multifunding.
Exclusivity contracts, meaning an ironclad promise that an organization would keep all its money at SVB, were a key facet of those funding deals. When SVB failed, it roiled startups that had traded banking flexibility for liquidity. Some fled the bank, violating their covenants to maintain their lights on and their payroll checks rolling.
When asked about potential exclusivity violations, Mayopoulos indicated that he understood emergency actions taken by startups.
“Given the change in circumstances and what the FDIC has done around insurance coverage, we might very very similar to to work with our clients to have those deposits come back to us,” the CEO said on the decision.
Clients who return would not need to worry about any fallout from breach of their covenants, Mayopoulos suggested. He didn’t say what would occur to ex-customers who did the identical.
— CNBC’s Cat Clifford contributed to this report.
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