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Space Science Digital > Blog > News > Space sector reacts to collapse of Silicon Valley Bank
News

Space sector reacts to collapse of Silicon Valley Bank

By Jayden Hanson March 10, 2023 4 Min Read
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Contents
A Very Serious SituationPublic Announcement Related

SAN FRANCISCO – Space companies and investors are reacting to the collapse of Silicon Valley Bank, a financial institution many relied on for investment, loans and traditional banking services.

Rocket Lab reported an aggregate balance with Silicon Valley Bank “of approximately $38 million, which is approximately 7.9 percent of the Company’s total cash and cash equivalents and marketable securities as of December 31, 2022,” in a March 10 report filed with the Securities and Exchange Commission.

In addition to providing installment loans and revolving credit lines for space companies and other high-tech firms, Silicon Valley Bank was known for its work with early-stage startups.

“They know the typical ins and outs of those companies compared to traditional banks, who may not understand the situations of companies starting out,” said a space industry consultant who asked not to be identified.

Astra Space, BlackSky, Planet, Redwire, Rocket Lab and Space Perspective are among the companies that attracted investment or borrowed money from Silicon Valley Bank.

Astra, Planet, Redwire and Rocket Lab repaid those loans when they went public through mergers with special purpose acquisition companies, according to annual 10-K SEC reports.

Still, many space companies have deposited revenue and investment in Silicon Valley Bank accounts for years. Some company CEOs are telling investors they are confident the Federal Deposit Insurance Corp. will ensure their access to funds beyond the $250,000 limit.

A Very Serious Situation

Privately, some entrepreneurs expressed less confidence.

“It’s a very serious situation,” said a space sector entrepreneur who asked not to be identified. “Our balance is suddenly only $450. There has been no communication from SVB even after the event became known.  Our primary SVB liaison, who has been very attentive in the past, is unreachable by any means. It’s appalling.”

The company in question maintained a balance below the $250,000 FDIC insurance limit, but “I don’t know when or how I will really regain access or how any of the [Know Your Client] regulatory processes will be coordinated, which is critical for international aerospace work,” the entrepreneur said by email. “I can only imagine the state of mind for startups that had their equity fundraising or revenue monies in SVB. That’s likely well over the outdated $250,000 FDIC limit.  How will they even make payroll this week, much less, carry-on operations?”

Overall, Silicon Valley Bank’s forced closure by the regulators won’t “affect the space ecosystem in the long run but it could heavily affect some startups’ cash flow in the near terms as they struggle to get their assets out,” Negar Feher, former Momentus Space vice president of business development, said by email.

Public Announcement

The California Department of Financial Protection and Innovation announced the closure March 10 of Silicon Valley Bank and the appointment of the FDIC as receiver. All account holders “will have full access to their insured deposits no later than Monday morning, March 13, 2023,” according to the announcement.

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TAGGED: Bank, collapse, reacts, sector, Silicon, space, Valley

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Jayden Hanson March 10, 2023
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