The collapse of Silicon Valley Bank (SVB) has sent shockwaves across multiple industries, and marketing is no exception. Sectors already struggling under macroeconomic pressures could see their prospects further dim in the fallout, and funding prospects for martech and ad-tech startups could dry up. Early-stage martech and ad-tech startups will encounter particular difficulty raising fresh capital, which could ultimately throw cold water on innovation for the year ahead.
Impact on Marketing Industry
Experts predict that more established agencies and brand marketers won’t see as many near-term issues stemming from SVB’s failure. But the pall the situation has cast over a shaky economy is hard to ignore, which could further belt-tightening measures in an already lean year.
“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. “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.”
The Collapse of Silicon Valley Bank
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.
The collapse of SVB and Signature Bank marks the second and third largest bank failures in U.S. history, respectively. While the intervention by regulators has allayed some of the most pressing short-term concerns, such as access to payrolls, why the institution fell apart is complicated.
Challenges for Media Platforms
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.
Implications for Martech and Ad-Tech Startups
SVB historically was the most startup-friendly bank providing credit facilities that would traditionally not be available for early-stage organizations. Michael Harrison, a managing partner at the consultant Winterberry Group, warns that early-stage martech and ad-tech startups will encounter particular difficulty raising fresh capital.
“Since then, budget makers have become more conservative, and paid spending is likely to decrease first as a result,” Legg added. Ultimately, SVB’s collapse could lead to a marketing slowdown, with funding prospects for martech and ad-tech startups drying up, along with media spend that’s already been on a steady downward trajectory.
In conclusion, while the impacts on marketing are still coming into focus, the collapse of Silicon Valley Bank could have significant implications for the industry as a whole. From challenges faced by media platforms to the difficulty of raising capital for martech and ad-tech startups, the fallout from SVB’s collapse may be felt for months or even years to come.