The stunning collapse of Silicon Valley Bank (SVB) last week has sent out shockwaves across multiple industries and left the business world on edge. The impacts on marketing are still coming into focus, but sectors that were already struggling under macroeconomic pressures could see their prospects further dim within the fallout. Ultimately, some cold water might get thrown on innovation for the yr ahead, as early-stage martech and ad-tech startups will encounter particular difficulty raising fresh capital.
“SVB historically was essentially the most startup-friendly bank providing credit facilities that will traditionally not be available for early-stage organizations,” said Michael Harrison, a managing partner on the consultant Winterberry Group, over email.
More established agencies and brand marketers won’t see as many near-term issues stemming from SVB’s failure, in accordance with experts. But the pall the situation has solid over a shaky economy is tough to disregard. It could further belt-tightening measures in an already lean yr and speed up martech and ad-tech consolidation, all during a period where demand for solutions in areas like cookie and measurement alternatives is high.
“The volatility and scares of the previous few days have caused investors and corporations to drag back and de-risk,” said Chris Legg, senior managing director at Progress Partners, a full-service merchant bank, over email. “Brands will turn out to be way more risk averse by way of vendor size, and lots of smaller vendors will find themselves in a position where they’ll must merge with larger platforms.”
Picking up the pieces
Founded in 1983, SVB grew to turn out to be the sixteenth largest bank within the U.S. It built a fame because the go-to destination for fledgling startups, together with 1000’s of enterprise capital firms that helped underwrite the tech world at large. SVB banked nearly half (44%) of venture-backed tech and healthcare IPOs within the U.S. last yr, in accordance with a presentation citing PitchBook data and SVB’s own evaluation.
Why the institution fell apart is complicated, but SVB’s implosion has already roiled pockets of martech, ad tech and media whilst intervention by regulators has allayed a number of the most pressing short-term concerns, reminiscent of access to payrolls. In a joint statement Sunday, the U.S. Treasury, U.S. Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) announced that they might backstop all depositors at each SVB and Signature Bank, which failed following SVB. The collapse of SVB and Signature Bank marks the second and third largest bank failures in U.S. history, respectively.
“With the federal government assurance on Sunday that every one deposits shall be secure, the situation immediately become a short-term liquidity crisis where speed of access to funds to cover this week’s payroll became the only focus,” said Legg. “That said, any company that has taken in enterprise capital funding without being profitable goes to come back under more scrutiny. Investors have replaced growth with profitability because the primary metric they give attention to.”
AcuityAds, which provides digital ad-targeting solutions, held just about all of its money — about $55 million in deposits — in SVB and halted trading on Friday. The Canadian ad-tech company on Monday in a follow-up said that the federal government’s remedies, together with its own actions over the past several days, have ensured operations can proceed easily.
Roku and Roblox, each publicly traded, are media platforms that similarly held massive amounts of money in SVB and felt the initial shock of the bank run. While some pressures have eased, these firms are actually contending with the challenge of picking up the pieces and the potential for weaker spending from marketers within the months ahead. National ad spending dropped 6% year-over-year in January, extending a monthslong decline, with relatively flat growth in digital, in accordance with recent Standard Media Index findings.
“Any firms coping with paid media are going to see a larger slowdown,” said Legg, while noting that this trend was picking up steam well before SVB fell apart. He cited a PwC survey from January that found lower than half (43%) of CMOs were investing in martech and automation amid fears of a recession and budget cuts.
“Since then, budget makers have turn out to be more conservative, and paid spending is more likely to decrease first as a result,” Legg added.
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