Exclusive: Union Square Ventures warned startup founders in November to diversify their deposit holdings after alarm over Silicon Valley Bank
When a senior Union Square Ventures partner was studying Silicon Valley Bank's financial statements last November he became so alarmed by the bank's financial condition that he issued an urgent plea to his partners: Alert every one of the firm's portfolio companies to diversify their bank deposits and not be concentrated in any one institution.
The warning, which has not been previously reported, never specifically mentioned SVB. But it gave USV founders a prophetic message four months before the bank was shut down by federal regulators last week, sparking a banking catastrophe not seen since the Global Financial Crisis, according to two sources with direct knowledge of the matter who were not authorized to speak publicly.
"If you read the SVB financial statements, which most people don't do, you could see an impending liquidity crisis," said one source. "A liquidity crisis was quite significant and real."
USV's early message to founders illustrates how the warning signs were there that were missed by regulators, auditors, rating agencies, and most other venture firms.
