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 in the fallout. Ultimately, some cold water might get thrown on innovation for the year ahead, as early-stage martech and ad-tech startups will encounter particular difficulty raising fresh capital.
“SVB historically was the most startup-friendly bank providing credit facilities that would traditionally not be available for early-stage organizations,” said Michael Harrison, a managing partner at 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, according to experts. But the pall the situation has cast over a shaky economy is hard to ignore. It could further belt-tightening measures in an already lean year and accelerate 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 last few days have caused investors and companies to pull back and de-risk,” said Chris Legg, senior managing director at Progress Partners, a full-service merchant bank, over email. “Brands will become much more risk averse in terms of vendor size, and many smaller vendors will find themselves in a position where they’ll need to merge with larger platforms.”
Picking up the pieces
Founded in 1983, SVB grew to become the 16th largest bank in the U.S. It built a reputation as the go-to destination for fledgling startups, along with thousands of venture capital firms that helped underwrite the tech world at large. SVB banked nearly half (44%) of venture-backed tech and healthcare IPOs in the U.S. last year, according to a presentation citing PitchBook data and SVB’s own analysis.
Why the institution fell apart is complicated, but SVB’s implosion has already roiled pockets of martech, ad tech and media even as intervention by regulators has allayed some of the most pressing short-term concerns, such as 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 would backstop all depositors at both 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 government assurance on Sunday that all deposits will be safe, the situation immediately turned into a short-term liquidity crisis where speed of access to funds to cover this week’s payroll became the sole focus,” said Legg. “That said, any company that has taken in venture capital funding without being profitable is going to come under more scrutiny. Investors have replaced growth with profitability as the number one metric they focus on.”
AcuityAds, which provides digital ad-targeting solutions, held almost all of its cash — 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 government’s remedies, along with its own actions over the past several days, have ensured operations can continue smoothly.
Roku and Roblox, both publicly traded, are media platforms that similarly held massive amounts of cash in SVB and felt the initial shock of the bank run. While some pressures have eased, these firms are now contending with the challenge of picking up the pieces and the potential for weaker spending from marketers in the months ahead. National ad spending dropped 6% year-over-year in January, extending a monthslong decline, with relatively flat growth in digital, according to recent Standard Media Index findings.
“Any companies dealing with paid media are going to see a bigger 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 less than half (43%) of CMOs were investing in martech and automation amid fears of a recession and budget cuts.
“Since then, budget makers have become more conservative, and paid spending is likely to decrease first as a result,” Legg added.