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Wedbush claims SVB impact to be long-lasting on Silicon Valley

According to Wedbush analysts, the effects of the recent SVB Financial Group situation will be long-lasting for Silicon Valley. Last week, SVB announced it had sold some securities at a loss and would sell $2.25 billion in new shares to shore up its balance sheet. This announcement triggered a panic, leading to California regulators closing down the tech lender, putting it under the control of the US Federal Deposit Insurance Corporation.

Wedbush analysts wrote in a note on Sunday evening that the "historical black eye moment" for SVB means there are short-term and long-term consequences for the tech sector from the second-biggest bank failure in US history. In the near-term, the impact on public tech companies is minimal, with the exception of Roku and a few others in the tech world with money at the bank.

However, the bigger and more troubling story is how this will change the start-up and VC community going forward. Wedbush has heard from numerous public tech companies, VCs, private tech start-ups, and investors, and believes that for tech start-ups with higher cash burns and a more uncertain environment, the hurdle for bank loans and other forms of debt financing will be a "different world going forward."

The analysts anticipate that scrutiny will be higher across the banking system, which will put more pressure on the financing needs of the tech start-up community for years to come. This could accelerate M&A within the start-up ecosystem and ultimately drive more late-stage start-ups to seek alternative financing, and in some cases, it could speed up the IPO path with a much tighter financing environment post SVB.

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