Odd Lots Betsy Cohen On Tech Investing and How SVB Failed Banking 101
Mar 27, 2023
Betsy Cohen, a veteran dealmaker and co-founder of Cohen Circle, dives into the current disarray in tech finance. She discusses how valuations have plummeted and the IPO landscape has changed dramatically. The conversation highlights the shocking collapse of Silicon Valley Bank and its impact on startups, alongside the critical differences between venture capital and traditional banking. Betsy also uncovers opportunities within the evolving fintech space and the need for a shift in investment strategies amidst these turbulent times.
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Tech vs. Banking
- There's an inherent tension between tech's focus on rapid growth and banking's emphasis on downside protection.
- This tension is exemplified by the venture capital model, which accepts failures in pursuit of the next big success, versus banking's need for diversified portfolios with reliable returns.
SVB's Initial Advantages and Downfall
- Silicon Valley Bank's (SVB) deep industry knowledge and San Francisco location were initially advantageous.
- However, their rapid growth alongside the tech industry led them to overlook fundamental banking principles.
SVB's Failure of Banking 101
- SVB failed Banking 101 by having an industry concentration and not adjusting their portfolio during rising interest rates.
- Despite having good quality loans and securities, their lack of response to changing market conditions was a critical error.