A supply particular person drops off pizzas at Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023.
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Silicon Valley Financial institution had exclusivity clauses with a few of its shoppers, proscribing their talent to faucet banking products and services from different establishments, SEC filings display.
The contracts, which made it unimaginable for the ones shoppers to soundly diversify the place they saved their cash, various in language and scope. CNBC has reviewed six agreements that businesses signed with SVB relating to financing or credit score answers. All required the corporations to open or handle financial institution accounts with SVB and use the company for all or maximum in their banking products and services.
The ones preparations are specifically problematic now that SVB has been seized via federal regulators after closing week’s run at the financial institution. The Federal Deposit Insurance coverage Company best insures as much as $250,000 in deposits for each and every consumer, leaving SVB’s buyer base, which is closely concentrated in tech startups, nervous that thousands and thousands of greenbacks in working budget can be locked up for an indefinite time frame.
Banking regulators devised a plan Sunday to backstop depositors with cash at SVB to take a look at and stem a feared panic around the business after the second-biggest financial institution failure in U.S. historical past.
On this photograph representation an Upstart Holdings emblem is observed on a smartphone display.
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As a part of a multi-million greenback financing settlement with online-lending platform Upstart Holdings, SVB required that the corporate handle all of its “working and different deposit accounts, the Money Collateral Account and securities/funding accounts” with SVB.
The contract made sure allowances for accounts at different banks, however set strict limits on their dimension.
Cloud instrument seller DocuSign additionally had an exclusivity contract with SVB, filings display, requiring that the e-signature corporate stay its “number one” depository, working, and securities accounts with the financial institution. That covenant used to be a part of a senior secured credit score facility between DocuSign and SVB dated Might 2015. DocuSign used to be allowed to stay present deposit accounts that had been held at Wells Fargo.
Upstart held its IPO in 2020, two years after DocuSign’s debut.
SVB supplied a multi-million greenback mortgage to Sprout Social, which went public in 2019. The financial institution required that the social media control instrument corporate handle all of its “number one working and different deposit accounts, the Money Collateral Account and securities/funding accounts” with SVB.
As with Upstart, SVB set strict limits at the price and form of accounts that Sprout may hang somewhere else.
In any other mortgage and safety settlement with Limelight Networks, which turned into Edgio, SVB required that the corporate in a similar way handle all “working accounts, depository accounts, and extra money with Financial institution and Financial institution’s Associates.”
The contract incorporated an exception for world financial institution accounts however required that Limelight use best SVB’s industry bank cards.
Based 40 years in the past, SVB grew to turn into the sixteenth greatest U.S. financial institution via property and a big project debt supplier, supporting corporations of their infancy and offering the kind of liquidity that startups could not get from most standard banks.
SVB did not instantly reply to a request for remark.
Dexcom signed a mortgage and safety settlement with SVB, requiring the maker of goods for managing diabetes to handle its accounts on the financial institution and to switch money held somewhere else inside of 90 days of the contract.
Dexcom’s settlement with SVB additionally required the corporate to open a lockbox and handle the “majority” of the corporate’s securities accounts with the financial institution.
Additionally throughout the health-tech marketplace, SVB had an exclusivity contract with Hyperion Therapeutics, a drugmaker that used to be received in 2015 for $1.1 billion via Horizon Pharma.
Hyperion used to be required to financial institution best with SVB, however significantly didn’t have to offer the company keep an eye on over any accounts it used for “payroll, payroll taxes, and different worker salary and receive advantages bills.”
Representatives from Upstart, DocuSign, Sprout Social, Edgio, Dexcom and Horizon did not instantly reply to requests for remark.
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