"Kimberley Strassel portrays as a bad thing that "SVB was beloved for its willingness to offer 'banking services to startups that often weren't profitable, in some cases didn't have a product, and would otherwise have a hard time getting a line of credit or a loan'" ("Did ESG Help Sink SVB?" Potomac Watch, March 17).
I worked for three Silicon Valley companies that went public.
No startup is profitable right from the start. By definition, they don't have a well-defined product or credit profile and would have a hard time getting credit on ordinary criteria. That's why "cash burn" is a well-known phrase in Silicon Valley.
Nevertheless, having received funding from venture capitalists, startups have banking and financial needs. The idea behind SVB's business was to provide an off-the-shelf solution so that startups could focus on developing new technology instead of managing working capital. If the startup failed, SVB would be there to help provide an orderly windup.
To compare software companies to mature businesses seeking credit is to miss the point of venture capital.
Frank DeRose
Fremont, Calif." [1]
1. Don't Fault SVB for Serving New Startups
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 27 Mar 2023: A.16.
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