Tech:NYC Digest: March 13

Tech:NYC Digest: March 13

March 13, 2023 • Estimated Reading Time: 8 minutes

Monday, March 13, 2023

So … how was your weekend? In today’s digest, the tech sector breathes a sigh of relief, the new federal safeguards to prevent another bank run, and how New York tech is uniquely positioned to help restore confidence in the financial sector.

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All of tech’s attention — in New York and across the country — remains focused on untangling the SVB and Signature Bank collapses over the weekend and preparing for the week to come.

This afternoon, Tech:NYC convened a meeting with Gov. Kathy Hochul, Mayor Eric Adams, and dozens of New York tech founders and investors to process next steps. The primary takeaway: There’s a lot more to be done, but New York’s position as a tech and financial hub remains strong.

  • “We will do everything in our power to protect New York’s workers, its small businesses, taxpayers, and our economy at large,” Mayor Adams said following the meeting. “New York City is the financial and innovation capital of the world, and we will work at all levels of government to ensure the continued stability of our financial ecosystem.”

  • Gov. Hochul added: “State and federal leaders have been working hand-in-hand to stabilize financial institutions and give depositors the confidence to know their funds will be available whenever they need. We are grateful to the FDIC and the Biden Administration for acting expeditiously to protect the deposits made by small and medium-sized businesses. New Yorkers should continue to bank with confidence.”

Tech:NYC, in close coordination with our member companies and partners in government, continues to monitor the situation as the dust (hopefully) settles this week.

In related reading:

  • Is this a bailout and 6 other questions about the SVB collapse (Washington Post)

  • Let the bailout debate begin (Axios)

  • Falling rates give clues about the Fed’s next moves (Axios)

It’s been a real roller coaster over the last 72 hours, but by and large, startup founders and investors could breathe a sigh of relief last night. (Washington Post)

  • The Treasury, Federal Reserve, and FDIC jointly announced that they would protect depositors with Silicon Valley Bank and Signature Bank and ensure full access to their money as of today, including deposits above the $250K FDIC-insured guarantee.

What else is new: The Federal Reserve also announced a Bank Term Funding Program (BTFP) — a special new lending facility — with very generous terms that will loan money to banks unattached to the value of their assets to ensure most banks don't get close to failing in the first place:

  • The BTFP will provide loans of up to one year in length, at the one-year overnight index swap rate plus 10 basis points, to US depository institutions.

  • The Treasury official said the fund has more than $100 billion in it and is highly unlikely to dip below $0. 

  • Any losses to the fund would be repaid in full by charging more fees to banks.

  • Treasury’s Exchange Stabilization Fund will provide $25 billion to backstop the Fed’s loan program.

What this all means: Banks shouldn’t have trouble getting access to cash — and risk a run — if customers start withdrawing funds.

Despite the sudden and shocking fall, as many have already written, it’s impossible to deny SVB’s central role in the tech and startup ecosystem. Half of all venture-backed companies in the US banked with SVB, including many startups either based in New York or with employees based in offices here.

  • Julie Samuels, Tech:NYC’s president and executive director, told Crain’s New York today, “SVB got what venture-backed companies looked liked at a time when traditional lenders didn’t get it.” 

  • The work ahead, she says, is finding new, well-financed partners for the startup community and leveraging the right mix of large financial institutions, regional and local banks, and innovative fintech solutions to carry us forward. 

But we’re not out of the woods yet

: Several bank stocks — particularly smaller regional banks —

this morning, and any risk of a more prolonged “contagion” effect will be an issue of concern in the weeks ahead.

  • Cubist, a NYC-based developer of web3 dev tools, raised $7 million in seed funding. Polychain Capital led the round and was joined by dao5, Amplify Partners, Polygon, Blizzard, and Axelar.

  • Iron Health, a NYC-based health care platform for women, raised $4.5 million in seed funding. Participating investors include March of Dimes’ Innovation Fund and others.

  • OthersideAI, a NYC-based developer of writing assistant HyperWrite, raised $2.8 million in funding. Cortical Ventures and Active Capital co-led the round and were joined by Madrona and other angels.

  • Proven, a NYC-based zero-knowledge proof of solvency solution for crypto firms, raised $15.8 million in seed funding. Participating investors include Framework Ventures, Balaji Srinivasan, Roger Chen, and Ada Yeo.

  • Violet, a NYC and Berlin-based privacy-protective compliance and identity infrastructure provider for decentralized finance, raised $15 million in funding. Participating investors include BlueYard Capital, Balderton, Ethereal Ventures, FinTech Collective, Brevan Howard, Coinbase Ventures, and others.

  • March 14: In-person: How and When to Raise Venture Capital, with The Fund managing partner Jenny Fielding, Forum Ventures managing partner Michael Cardamone, NY Ventures investor Momo Bi. Hosted by Stacklist and betaworks. Register here.

  • March 15: In-person: NY Enterprise Technology Meetup, with Haystack partner Semil Shah, Cowboy Ventures partner Amanda Robson, Streamdal CEO Ustin Zarubin, and others. Hosted by Work-Bench. Register here.

  • March 15: In-person: NY Product Meetup, with Regal co-founder, CTO, and head of product Rebecca Greene. Hosted by Productboard. Register here.

  • March 16: Virtual: Fintech’s inflection point, with Bain Capital Ventures partner Matt Harris. Hosted by Axios. Register here.

  • March 29: Virtual: Exchange: A New Kind of Investor Conference, with A Starting Point co-founder Chris Evans, ARK Invest CEO Cathie Wood, NYU Stern School of Business professor Scott Galloway, and others. Hosted by Public. Register here.

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