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Deposit sell-off in Silicon Valley as startups struggle with liquidity

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Deposit sell-off in Silicon Valley as startups struggle with liquidity

On March 12, according to the Financial Times, some depositors of Silicon Valley banks are trying to sell their deposits at a large discount to raise cash. According to the data of Cherokee Acquisition, the quotation of bank deposits in Silicon Valley that are not covered by insurance is between 55% and 65% on the 10th. According to the report, for some start-ups, it is their last resort to sell their deposits at a discount in order to pay their employees’ wages. A number of VCs said that they had contacted some start-ups and hoped to buy their deposits at a certain discount. Data shows that by the end of 2022, 96% of deposits in Silicon Valley banks were not covered by the Federal Deposit Insurance Corporation (FDIC). (CCTV Finance)

Some Silicon Valley bank depositors seek to sell deposits at a discount

Analysis based on this information:


According to a report by the Financial Times, some depositors of Silicon Valley banks are selling their deposits at a significant discount to raise cash, which is reflected in the quotation range of 55% to 65% on the 10th of March. The fact that start-ups in the Valley are resorting to such measures suggests that they are struggling with liquidity issues and are finding it challenging to pay the wages of their employees.

For many start-ups, selling deposits at a discount may be their last resort. A number of venture capitalists (VCs) have reportedly contacted some start-ups to buy their deposits at a certain discount, which indicates that VCs are looking for investment opportunities as well as ways to help start-ups overcome their cash flow issues.

The data reveals that by the end of 2022, 96% of deposits in Silicon Valley banks were not covered by the Federal Deposit Insurance Corporation (FDIC). This means that depositors may suffer losses in case the banks fail. Therefore, investors may be willing to buy these deposits at a discount due to the risk involved.

This report highlights the financial struggles that many start-ups are facing in Silicon Valley, despite being situated in one of the world’s most lucrative and innovative hubs. The venture capital industry is highly competitive, and only a select few start-ups receive funding. As a result, many young tech companies are unable to secure enough funding to grow and remain solvent. In some cases, they may have to resort to selling deposits at a discount to stay afloat.

In conclusion, the sale of deposits at a discount in Silicon Valley reflects the current struggles that start-ups are facing with their liquidity. VCs and other investors may view discounted deposits as an investment opportunity, in addition to helping start-ups pay their employees’ wages. However, this also reveals the dire financial situation that some start-ups are facing, which could result in many failed ventures in the years to come.

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