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Silicon Valley Bank’s Failure Deals a Blow to Europe’s Startups

Silicon Valley Bank’s Failure Deals a Blow to Europe’s Startups

Silicon Valley Bank’s struggles started with a bad bet on long-dated US bonds. Rising interest rates meant that the value of those bonds fell. As depositors started to worry about the bank’s balance sheet, they pulled their money out. High interest rates have become a challenge across the industry, ending the cheap loans  that tech companies got used to over the past decade and reducing available funding.

More than $400 billion in value was wiped from Europe’s tech industry in 2022, while some companies, like the buy-now, pay-later provider Klarna, watched their valuation plunge more than 85 percent. This year there’s been little reprieve, as layoffs continue within local startups as well as at Europe’s big tech outposts. At the end of February, Google confirmed it would cut 200 jobs from its business in Ireland. 

“The whole tech industry is suffering,” Warner says. “Generally, in 2023 rounds are taking much longer; there’s much less capital available.” 

Against this backdrop it’s unclear whether any major European bank is able or willing to fill the niche that Silicon Valley Bank is leaving. 

“Silicon Valley Bank is unique. There are not that many banks which provide startups loans,” says Reinhilde Veugelers, a senior fellow at economic think tank Bruegel and a professor at Belgian university KU Leuven. “Typically, European banks are not good alternatives, because they’re way too risk-averse.” 

And even if a bank wanted to take the risk, they’d likely struggle to replicate Silicon Valley Bank’s deep knowledge of the startup ecosystem, Veugelers adds. “You need way more than deep pockets. You also need to be sufficiently close to the whole venture capital market and have the ability to do due diligence” she says. “If the bank had that capacity, it would have already been doing this.” HSBC did not immediately reply to WIRED’s request for comment. 

Silicon Valley Bank was prepared to take risks that other banks wouldn’t, says Frederik Schouboe, co-CEO and cofounder of the Danish cloud company KeepIt. 

KeepIt secured a $22.5 million debt financing package—a way of raising money through borrowing—last year from Silicon Valley Bank’s UK business. Although the bank opened an office in Copenhagen in 2019, the branch did not have a banking license. Mainstream banks “are ultimately impossible to bank with if you are making a deficit in a subscription business,” Schouboe says. “The regulatory environment is too strict for them to actually help us.”

The way Silicon Valley Bank operated in Europe has earned its admirers. But now those people are worried the company’s collapse will warn other banks away from funding tech in the same way. It was SBV’s banking practices that failed, not the business model of funding the startup sector, says Berthold Baurek-Karlic, founder and managing partner of Vienna-based investment company Venionaire Capital. “What they did was they made big mistakes in risk management,” he adds. “If interest rates rise, this shouldn’t make your bank go bust.”

Baurek-Karlic believes European startups were benefiting from the riskier bets that Silicon Valley Bank was taking, such as offering venture debt deals. The US and UK said Silicon Valley Bank is not system critical, arguing there was limited risk of contagion to other banks. That might be true in banking, he says. “But for the tech ecosystem, it was system critical.”

After Layoffs, Crypto Startups Face a ‘Crucible Moment’

After Layoffs, Crypto Startups Face a ‘Crucible Moment’

In May, the venture capital firm Sequoia circulated a memo among its startup founders. The 52-page presentation warned of a challenging road ahead, paved by inflation, rising interest rates, a Nasdaq drawdown, supply chain issues, war, and a general weariness about the economy. Things were about to get tough, and this time, venture capital would not be coming to the rescue. “We believe this is a Crucible Moment,” the firm’s partners wrote. “Companies who move the quickest and have the most runway are most likely to avoid the death spiral.”

Plenty of startups seem to be taking Sequoia’s advice. The mood has become downright funereal as founders and CEOs cut the excesses of 2021 from their budgets. Most crucially, these reductions have affected head count. More than 10,000 startup employees have been laid off since the start of June, according to, which catalogs job cuts. Since the start of the year, the tally is closer to 40,000.

The latest victims have been crypto companies, and the carnage is not small. On Tuesday, Coinbase laid off 1,100 employees, abruptly cutting their access to corporate email accounts and locking them out of the company’s Slack. Those layoffs came just days after Coinbase rescinded job offers from more than 300 people who planned to start working there in the coming weeks. Two other crypto startups—BlockFi and—each cut hundreds of jobs on Monday; the crypto exchange Gemini also laid off about 10 percent of its staff earlier this month. Collectively, more than 2,000 employees of crypto startups have lost their jobs since the start of June—about one-fifth of all startup layoffs this month.

The conversation around crypto companies has changed abruptly in the past year. In 2021, they were the darling of venture capitalists, who showered them with billions of dollars to fund aggressive growth. Coinbase, which went public in April 2021 at $328 a share, seemed to suggest an emerging gold mine in the sector. Other companies, like BlockFi, started hiring aggressively with ambitions to go public. Four crypto startups took out expensive prime-time ads in the most recent Super Bowl.

Coinbase was also focused on hypergrowth, scaling its staff from 1,250 at the beginning of 2021 to about 5,000 in 2022. “It is now clear to me that we over-hired,” Brian Armstrong, Coinbase’s CEO, wrote in a blog post on Tuesday, where he announced the layoffs. “We grew too quickly.”

“It could be that crypto is the canary in the coal mine,” says David A. Kirsch, associate professor of strategy and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. He describes the contractions in crypto startups as one potential signal of “a great unraveling,” where more startups are evaluated for how well they can deliver on their promises. If history is any indication, those that can’t are fated for “the death spiral.”

Kirsch has spent years studying the lessons of past crashes; he is also the author of Bubbles and Crashes, a book about boom-bust cycles in tech. Kirsch says that the bubble tends to pop first in high-leverage, high-growth sectors. When the Nasdaq fell in 2000, for example, the value of most ecommerce companies vanished “well in advance of the broader market decline.” Companies like and—which had made big, splashy public debuts—eventually went bankrupt.

Theranos Founder Elizabeth Holmes Is Convicted on 4 Counts

Theranos Founder Elizabeth Holmes Is Convicted on 4 Counts

For three years, Elizabeth Holmes has faced the court of public opinion, as countless books, articles, documentaries, and TV shows have squeezed every last drop out of the saga of the blood-testing startup Theranos. Now, an actual court has delivered the final verdict. On Monday, after seven days of deliberations, a jury in San Jose, California found her guilty on four counts of wire fraud and conspiracy to commit wire fraud. The jury returned a verdict of not guilty on another four counts, and could not agree on three.

The four guilty charges involve Theranos’ investors, who say they were misled about the company’s capabilities, and who lost millions of dollars after its demise. Holmes now faces up to 20 years in prison for each conviction. (The judge has not yet set a hearing for sentencing.)

Over the past three months, the prosecution made its case that Holmes knowingly “chose fraud over business failure,” convincing her investors to sink more money into the company despite its failings. Twenty-nine witnesses took the stand, including former employees who testified that when Theranos’ technology did not work as promised, Holmes encouraged them to cover it up. One former product manager said the company faked demos and removed abnormal results when sending reports to investors. Another revealed that Holmes exaggerated partnerships with pharmaceutical companies, made up nonexistent military contracts, and pasted pharmaceutical logos onto Theranos’ reports, confusing investors and potential partners about who was vouching for the blood-testing technology. A journalist from Fortune, who wrote a cover story about Theranos in 2014, said Holmes failed to correct numerous errors in the reporting because it benefited the company to appear more capable than it actually was.

Mountains of evidence—including text messages, emails, and company documents—showed that Theranos’ technology was in disrepair and failed to live up to its founder’s vision as the future of blood testing. But the case hinged on whether Holmes, as the company’s CEO, knowingly deceived investors and patients, or if she acted in good faith as a struggling entrepreneur. “The battle ground is Holmes’ mental state: whether or not she had the intent to commit fraud,” says James Melendres, a former federal prosecutor and a partner at business law firm Snell & Wilmer. “You have 12 jurors—12 people off the street—who sit in a room and decide what was in Holmes’ mind.” The jury found Holmes not guilty on the counts involving patients, two of whom received bogus test results from Theranos’ blood testing technology.

The defense called three witnesses, including Holmes herself, who spent seven days on the stand diffusing the blame across Theranos’ many scientific advisers and board members. Many of Theranos’ employees had years of experience working in biotechnology; Holmes, by comparison, dropped out of Stanford in her sophomore year.

She testified that Ramesh “Sunny” Balwani, her former business partner and former boyfriend, was responsible for preparing falsified financial reports and overseeing the company’s labs. Holmes also said that Balwani controlled and abused her, affecting her mental state during her later years at Theranos. Balwani faces his own criminal trial later this year.

Holmes’ case has been viewed as Silicon Valley’s trial of the decade, as well as an indictment on startup culture itself: When does a founder’s hubris become fraud? Melendres calls the decision a “bellwether,” noting that it could become a landmark case in the Department of Justice’s handling of startups.

For the rest of Silicon Valley, the case may be a reminder that there is a limit to how much startups can get away with—and that the government is watching. “The government usually wins these things,” says Jennifer Kennedy Park, a partner at Cleary Gottlieb Steen & Hamilton. She also notes the vast resources and subpoena powers that can give prosecutors an advantage. This case shows that founders are not off-limits.

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