nyventurehub.com - New York Venture Hub | Entrepreneurs, Venture Capital & Start-up Lawyers | Farrell Fritz Law Firm

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Description: New York Venture Hub is written by Farrell Fritz Law Business attorneys and focuses on legal issues surrounding emerging enterprises.

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Legal & Business Issues Facing Entrepreneurs and Investors

The collapse of Silicon Valley Bank will have enormous repercussions for startups and VCs in ways seen and unseen.  As for the unseen, SVB had deep relationships among the various players in the venture ecosystem.  Founders and investors established banking relationships with SVB in part because of the opportunities SVB provided to network within the space.  It will be difficult for other lenders who don’t have these deep relationships to replace SVB in this capacity and fill this valuable role.

But SVB’s downfall will impact startups in tangible ways as well.  SVB was the largest provider of venture debt, a niche category of lower cost financing that was tailored for early stage, venture backed companies.  Venture debt provides an attractive means for startups to extend runway with less dilution, at lower interest rates than with standard commercial loans (typically, 50 basis points above prime) and looser credit protection mechanisms.  Less dilution rather than no dilution (as is the case with mo

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