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SVB bankruptcy: "In Silicon Valley, everyone was afraid"

Slimane Boumedine, CFO of Physna, a Californian company specializing in 3D research, and victim of the bankruptcy of Silicon Valley Bank. © Slimane Boumedine

Text by: Bruno Faure Follow

5 min

Slimane Boumedine is the CFO of Physna, a Californian company specializing in 3D research, victim of the bankruptcy of Silicon Valley Bank. This Franco-Algerian who has been living in the United States for fifteen years has experienced the panic of the tech sector very closely. He delivers a critical analysis of this unprecedented situation.

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RFI: What happened to your company on March 8, the day of the SVB's bankruptcy?

Slimane Boumedine : That morning, we were in shock. SVB is one of the banks with which we do our transactions. When we learned that it might be in default, we put in place our internal financial regulations. We were fortunate to be able to transfer internally all the money that was in the operational account to an account that is not on their balance sheet and that later allowed us to recover our money in a guaranteed way. But there is a fear that has settled throughout Silicon Valley.

A word-of-mouth phenomenon between tech companies and with venture capital firms?

Exactly. And the problem is that companies structure their financial services differently. Some believed, rightly or wrongly, that they would be affected, which created a snowball effect. Until Sunday night when the Fed announced its plan, I can tell you that everyone was afraid, even I who knew that the way I had structured the financial service allowed us to suffer the minimum impact.

How do you analyze this bankruptcy? Have the risks been underestimated by the SVB?

If we look at the feedback from the bank's current customers, everyone was satisfied with the service and the employees. It is a bank that has understood very well the opportunities and risks that tech entails. We therefore discovered with horror that management had mismanaged or misanticipated the Fed's reversal on interest rates. This raises another question: will we have a bank willing to venture into this sector and support its businesses?

In the United States, there is a bank deposit guarantee agency. Does that reassure you?

Yes and no. As a simple custodian, for me, $250,000 guaranteed might be enough. Not for companies. Their needs are much greater. The federal insurance decided that everyone who had deposits, regardless of the amount, would be 100% guaranteed. But until when? That is the problem. There are many voices calling for this ceiling to be reassessed for depositors and especially for companies. That would be the best thing to do because a depositor should not be penalized by a shareholder who voted for a management that mismanaged his bank.

Is this a lesson for start-ups and tech investors? Do not put all your eggs in one basket and diversify their deposits?

When I queued at the reopening of the SVB, I realized that the majority of start-ups only use a bank and an account, and therefore do not respect the basic financial fundamentals. You have to have several banks, even if it takes time to do the paperwork. This is the first thing to do in case of a problem or if you are in conflict with your bank. We had three.

Are you a little quieter now? Treasury Secretary Janet Yellen says the financial sector situation in the United States has stabilized.

The problem is the emotional nature of the depositors. We have seen that in one or two days, several major banks stepped in and deposited $30 billion in First Republic to support this bank. If you just look at it from an economic point of view, there is no systemic risk in principle. But the emotional is an important factor when it comes to the wallet. There are large capital movements. In my view, the Fed and the Biden administration should announce that all deposits are guaranteed, regardless of the amount. You have to put in place a system where the deposit bank and the investment bank keep enough deposits in-house to avoid these future problems.

Last thing: tell us about your personal journey. How did you get here?

I did a technological baccalaureate in France, in the suburbs of Metz. I was unemployed, I was a cleaning lady in Luxembourg, finally a "cleaner" as they say. This means for young people who come from the suburbs that if they believe in their own destiny and if they work, they can succeed. I have a technology baccalaureate and today I work for Sequoia Capital, for Tiger Global. And that's the education in France that allowed me to do that. We have a very good education in France, thanks to the teachers who believe in us. Young people need to say to themselves, "Later, if I want to be something, I can succeed."

► Read also: Bankruptcy of the SVB bank: what impacts on African tech?

► For more information: SVB, Credit Suisse, Eurozone: who can save the banks?

(Éco d'ici éco d'ailleurs, broadcasts on Saturdays at 10:10 GMT and 17:10 UT)

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