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Y Combinator Says Goodbye to Late Stage Investments, SVB Looks to Divest, and Filings Show VCs Preferred Banking With SVB.

Author

Adam from VC Brags
March 14, 2023

Welcome Shareholders,

In this daily edition of the Brags Newsletter, we'll cover Y Combinator's plans to exit late-stage investments, Silicon Valley Bank's parent company looking to sell off its assets to stay afloat, and how a majority of VCs kept their money in SVB before the bust.

So sit back, grab a snack, and enjoy!

Venture Today 👏

  • Startup Accelerator Y Combinator announced that it would be pulling back from making investments in late-stage startups, with the move resulting in 17 employees being let go.

YC, known for its early-stage investing focus through its core accelerator program, also engages in late-stage investing. However, the company said that late-stage investments were so different from the early-stage incubation programs that it distracted from their core mission.

YC late-stage fund partners Anu Hariharan and Ali Rowghani who were previously leading the late stage fund, said that they would be setting up their own fund, as YC wouldn't raise another late-stage fund. The news comes a few days after reports emerged that the accelerator would reduce the number of accepted startups for its program by 40%.

  • SVB Financial, the parent company of SVB Bank, said that it was looking for buyers for its other subsidiaries, namely SVB Capital and SVB Securities.

SVB Capital manages $9.5 billion in assets, and its affiliate SVB Securities has been operational since 1999. Headquartered in Boston, SVB securities has facilitated services for startups in nearly 700 deals. SVB Securities specializes in providing services like M&A advisory, capital raising, and equity research in healthcare and technology verticals. The division was acquired in 2019 when SVB Financial purchased Leerink Partners, a boutique investment bank, and subsequently rebranded the group. In 2022, the division further expanded with the acquisition of MoffettNathanson.

SVB Capital, the VC and private credit arm of SVB Financial, invests in a wide range of businesses that often bank with SVB. Across at least 112 funding rounds, SVB Capital has supported classic US startups like Opendoor, Roofstock, Paddle, and Shield AI, as well as European startups like CoachHub. Additionally, the firm has been a limited partner in major VC firms such as Accel, Bessemer, Index, Kleiner Perkins, Sequoia, and Spark.

  • New data compiled based on SEC filings showed that in all, 1,074 private equity and venture capital firms had a portion of their assets in Silicon Valley Bank.

The general outcry from VCs to help backstop depositors of the failed bank then was at least in part a result of their own self-interests. Firms like Andreessen Horowitz, General Catalyst, Accel, and Benchmark were storing at least a portion of the nearly 6,000 funds, which represented over $863 billion in assets.

Despite being relatively small compared to financial giants like Bank of America or JPMorgan Chase, Silicon Valley Bank has a hyper-concentrated customer base within the startup and venture capital world. Its clientele includes over 1,000 top-tier venture and private equity firms such as Andreessen Horowitz, General Catalyst, Union Square Ventures, Thrive Capital, Two Sigma, Accel, Benchmark, Seven Seven Six, and Flybridge Capital Partners, as well as a range of other investors from real estate or infrastructure to accelerator funds like Techstars.

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