The venture capital firm is working on a long-term plan to preserve parts of Silicon Valley Bank so it can continue to serve clients in the technology sector, according to people briefed on the effort.
Since the end of last week, a group of more than a dozen VC companies have been in talks about how to enable SVB to continue lending to, investing in and advising companies and executives in the sector. Companies involved in the discussions include General Catalyst, Andreessen Horowitz and Khosla Ventures, the people said.
One of the proposals being discussed is the creation of a consortium with private investment firm Apollo Global Management that could bid for SVB’s shares, he added.
The group has also been talking to other big buyout houses about financing the venture as well as Credit Suisse First Boston, the investment bank headed by Michael Klein, which advised on potential ways to arrange the deal, according to one of the people.
Efforts to salvage something from the ruins of SVB, which was shut down by regulators last week, underscore the importance of the institution to venture capitalists. It also marks a striking turnround for the venture fund that was accused last week of fueling a run on the bank after some – including Peter Thiel’s Founder of the Fund – advised portfolio companies to transfer deposits to other lenders amid concerns about SVB’s financial health.
The founder of the Fund is not a member of the consortium in the talks to acquire some of the bank’s assets, one person with direct knowledge of the talks said.
Before proceeding with any bid, the group is asking regulators for more information on the bank’s condition, according to one of the people.
“It’s still premature but I hope to get together in the next few days,” said one of the people involved in the discussion.
VC firms may need outside capital, as well as expertise in the technical aspects of running a financial institution that they don’t have. One person said any bid would be arranged through a consortium so that no individual business would be caught in the rules of banking regulation.
Apollo is a long-time investor in the debt and equity of financial institutions and was in talks with dozens of venture capital firms over the weekend about providing liquidity to portfolio companies whose cash has been trapped in SVB.
Apollo may be interested in acquiring SVB’s loan book or credit business, but is not interested in directly acquiring a stake in a potential new SVB, according to people familiar with the thinking.
Apollo, Andreessen Horowitz and General Catalyst declined to comment. Khosla Ventures did not respond to a request for comment.
In addition to its core deposit bank, SVB is known for its wealth management and investment banking group, which caters to venture capital firms and portfolio companies as well as wealthy technology executives and investors.
“The deal may be wholesale or piecemeal, but clearly there has to be a provider of financial capital stepping into the breach . . . because there is a scenario where the big banks won’t get it [to agreements with regulators over the potential liability of buying SVB]”According to a senior executive at a leading venture capital firm who was directly involved in the discussions.
Any attempt to resuscitate SVB faces challenges of time and complexity. One VC executive said the firm is busy ensuring the liquidity of its portfolio companies and that SVB’s clients at some point may have established new banking relationships elsewhere.
“Even if the strongest business people shout, I don’t know how much [chief financial officers] the company will wire the money back to whatever is left [of SVB],” he said.