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- 📶 The dominos are falling
📶 The dominos are falling
Bankrupt banks, shotgun weddings, and a tool to improve your linkbuilding
Hey everybody 👋
We’re trying something new this week.
The world moves fast, and you don’t always have time to digest the news. Here are the things that happened this week in venture, why they matter, and what we think happens next.
Let us know at the bottom of this email what you think of this new format.
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This Week in Venture
SVB goes bankrupt
SVB Financial Group filed for Chapter 11 bankruptcy protection on Friday in order to try to protect its creditors.
Why it matters: Anytime a company goes under, somebody is left holding the bag. In SVB’s case, we already knew that equity holders are wiped out, but this at least gives hope that bond holders may get some of their money back.
The company is insolvent but has ~$2.2 billion in liquidity.
Banking crises affect everybody, and VCs are not excluded from that list.
What happens next: The second order effects of the SVB debacle are just starting to emerge.
Trust in the system is failing, and other commercial banks are worried they won’t receive any protection from the Fed if they go under.
We think this will result in a massive consolidation of deposits into the major four banks (JP Morgan, Bank of America, Wells Fargo, and Citigroup). If you’re interested in what happens after this, read into what has happened historically when a banking system becomes nationalized.
Credit Suisse + UBS Shotgun Wedding
UBS bought Credit Suisse for $3.2 billion in an all-stock deal.
Why it matters: This is another domino in the financial meltdown that is occurring right now. A few simplified things about this deal that are unusual:
UBS does not have enough collateral to make this transaction.
The Swiss government is lending $100 billion in deposits to UBS in order to get the deal to pass.
Most importantly: This was all done without shareholder approval. (“The Swiss government has exercised its emergency powers to facilitate a swift consummation of this merger without the necessity of shareholder approval.” - Source)
What happens next: A week ago, CS was a $10 billion company. A decade ago, it was a $50 billion company. Now it’s being sold for pennies on the dollar.
The financial crisis does not end here.
Similar to what we believe will happen in the US, this is effectively nationalization of the Swiss banking system.
We encourage you to read about nationalization in banking if you haven’t done so already. Scary stuff.
What We’re Learning
If you’re building a website, business, or selling anything online, there is one thing that will solve most of your problems, and that is TRAFFIC.
If you want traffic, you can either pay for it through ads or earn it through SEO. We’ve done both, but we think that investing in SEO creates a stronger moat around your brand.
One of the biggest things we’ve learned with SEO is that you have to do a good job linking posts, or else Google will assume you don’t have domain knowledge. This will punish your traffic. If you want more stats and strategies on linkbuilding, read this and this.
If want to improve your internal linking profile and build more domain authority to the pages you create, you can either do it manually (this would take hours and you’d constantly have to monitor and add for new posts), or you can use LinkWhisperer.
We’ve started using this Wordpress plugin, and it has been a massive help in improving our site and increasing our traffic.
Tools: LinkWhisperer, Wordpress
Tweet of the Week
Just as in 2008, the bankers lied.
This time, the central bankers, the banks, and the bank regulators have lied to all dollar holders and depositors.
This isn't your typical fractional reserve situation. The problem is that there isn't enough in the archive.is/CtW1B… twitter.com/i/web/status/1…
— Balaji (@balajis)
8:09 PM • Mar 17, 2023
We’re not ones to sound the alarm, and we think that the majority of “crises” today are manufactured by the media.
That said, we think the current financial mess is different, and it’s the collapse of a house of cards.
The thread above gives background on what has lead to where we are today and what comes next.
Jobs
Links We Like
Have an article you like that we should include in this section? Let us know by responding to this email.
Confluence.VC Venture Consultants
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