Questions over senior SBC exec on Sezzle board

The local sector is breathing a sigh of relief following news the US government will protect all deposits to the collapsed Silicon Valley Bank.

ASX-listed buy now pay later firm Sezzle will face increased pressure over its board composition, after a governance expert said fund managers were unlikely to support keeping an executive from collapsed lender Silicon Valley Bank on as a director.

The demise of SVB has raised questions about the board tenure of Sezzle non-executive director Kathleen Pierce-Gilmore, the bank’s global head of payments until its dramatic fall over the weekend.

Emailed questions to Sezzle over Ms Pierce-Gilmore’s role were unanswered by Monday evening.

Ownership Matters’ director Dean Paatsch, who has closely analysed the potential SVB fallout on the Australian stockmarket, said: “She’d (Ms Pierce-Gilmore) be unlikely to withstand scrutiny from institutional investors, if there were any on the (Sezzle shareholder) register.”

Sezzle on Monday outlined it had $US1.2m on deposit with SVB, representing less than 2 per cent of the company’s cash and cash equivalent balance. The statement said Sezzle did not maintain other “material accounts or lines of credit” with SVB.

Still, the stock tumbled 5.4 per cent to 3 cents through Monday’s trading session.

SVB’s executive in charge of Australia and New Zealand, Sara Rona, meanwhile opened up in a LinkedIn post about her company’s collapse.

“A heartbreaking day. Thank you to everyone who has called, messaged, texted, etc. It means the world to have such a global community around me,” Ms Rona said in a post on LinkedIn.

“#SVB has changed my career- I really found myself here and found a job I loved to my core.

“I’m incredibly aware of how this has impacted SVB’s clients – my clients, and I don’t take that lightly.

“While I’m unsure what the future holds-like all my colleagues and the start-up ecosystem alike, hoping for a positive outcome.”

A growing number of Australian technology companies and investors have revealed their exposure to SVB, which collapsed over the weekend in the second-biggest bank failure in US history, stoking fears that start-ups with money tied up in the bank wouldn’t be able to meet payroll or rent obligations.

Banking regulators stepped in on Monday however and moved to stem the panic, devising a plan to backstop depositors and give them full access to their money, a move welcomed by members of Australia’s technology industry.

“Today we are taking decisive actions to protect the US economy by strengthening public confidence in our banking system,” the federal regulators said in a statement on Monday morning local time.

US authorities swooped in and seized the assets of SVB, a key lender to US start-ups since the 1980s, after a run on deposits made it no longer tenable. Picture: Noah Berger/AFP

“This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

As The Australian reported, the nation’s largest venture capital firms Blackbird along with AirTree, Square Peg and Folklore have confirmed they hold exposure to the collapsed lender through some of their portfolio companies.

The Tech Council of Australia, the peak body representing some of the nation’s largest technology companies, welcomed the US Treasury and Federal Reserve’s emergency support.

“We welcome the announcement this morning Australian time that US financial regulators will ensure that all depositors of Silicon Valley Bank will be paid back in full and be able to access deposits from Monday, 13 March, US time,” a Tech Council spokeswoman said.

“This will relieve financial pressure on affected companies.”

Tech Council chairwoman Kate Pounder. Jamila Toderas/The Australian

After Australian venture capital firms worked over the weekend to determine which of their start-ups had exposure to SVB, a number of ASX-listed tech firms and private start-ups revealed they had some exposure to the bank.

Australian unicorn graphic design software maker Canva said on Monday it had a “very small portion” of its overall capital in an account with Silicon Valley Bank.

“We’re disheartened to see the news about Silicon Valley Bank and the impact it’s having on the tech ecosystem. We’re in the fortunate position of having the majority of our cash outside of their banking system and have safety nets in place to ensure our operations aren’t compromised,” a spokesman told The Australian via email.

“More broadly, we’re also very mindful that not everyone is as lucky as us, and we’ll be on the lookout over the days and weeks to come to see if there are ways we can be supportive of the broader ecosystem.

“However, the US government has also announced that all depositors will have access to all funds again from tomorrow.”

The regulators said there would be no bailouts or taxpayer costs associated with the plans, and that stock and bondholders would not be protected. The government’s bank-deposit insurance fund will cover all deposits.

Before its spectacular collapse, SVB offered mortgage lending, private stock-based lending and lines of credit to start-ups globally, including in Australia.

Major Canva investor Blackbird welcomed the US government’s rescue plan, after a “challenging 24 hours”.

“The latest news on the SVB situation is positive, and we welcome the update that depositors will have access to all money,” a Blackbird spokeswoman told The Australian.

“Our team and founder community have been in steady communication over the last 72 hours through a shared forum. While many of our portfolio companies have no exposure to this situation, the support and solidarity from this community has been galvanising.

“The discussions in this group have helped individual companies share information and work through potential solutions, and we are proud of how the founders in our portfolio have tackled a challenging 72 hours.”

Alister Coleman, managing partner of Folklore Ventures, said the rescue plan was a “great relief” for Australian start-ups.

Folklore Ventures founder Alister Coleman. Picture: Supplied

“The Fed’s move does not entirely bring to close the issue caused by the SVB collapse however, as the credit/hedge facilities need to be worked out and remain an unknown for US start-ups with obligations to SVB, or whoever buys these facilities.”

ASX-listed software firm Life360 said on Monday it had exposure of up to $5.6m with the bank, while SiteMinder had cash holdings of up to $10m plus an undrawn $20m revolving credit line tied to Silicon Valley Bank.

Other companies with exposure to the bank included software outfit Xero, which last week announced it was shedding up to 800 jobs, and had a total exposure of $5m. ASX-listed software firms Redbubble, Sezzle, and Dubber also had exposure, which each described as immaterial.

ASX-listed collaboration software maker Nitro had $12.2m in cash reserves at SVB, while Tissue Repair, Pengana, Laybuy, Freelancer and Whispir also had reserves with the bank.

RBC Capital Markets analyst Garry Sherriff said that material direct exposure to SVB was unlikely across most of Australia’s technology industry.

“If individual large customers do not have exposure, smaller customers may, which on their own is not material but in aggregate could be,” he said in a research note. “Risk likelihood however appears low at present.”