The Near Miss Apocalypse: Predictions for Post SVB Collapse

Spencer Rascoff

Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.

The Near Miss Apocalypse: Predictions for Post SVB Collapse
Evan Xie

The historic Silicon Valley Bank collapse dominated headlines recently, and the tech and financial communities have only just started processing the aftermath. The 48-hour breakdown was both historic and a few inches away from economically catastrophic, and thanks to the swift moves of the FDIC, complete disaster was avoided.

But it’s still been disruptive. SVB was the banking partner for nearly half of U.S. venture-backed technology and healthcare companies that listed on stock markets in 2022, making it one of the biggest lenders for early-stage startups. The aftershocks of SVB’s breakdown spread just as far and fast as the main event: the close of Signature Bank just two days later, major market volatility, other banking crises at Credit Suisse, tech industry troubles, and much more.

In the days since, things have settled slightly, and the world’s fingers are crossed that depositors are comforted enough and confident enough to avoid another bank run. It’s good news, but we aren’t out of the woods yet. Now that we know the second-largest bank failure in U.S. history could be looming around any corner, how does that change the ways startups do business?

Level, Set, Go

Before we get into what could happen, it’s smart to level-set about how we got here. (And for an introductory primer, this short podcast can help.)

  • The government 100% did the right thing by assuring depositors that they will be made whole. The FDIC swooped in, steadied the ship, and made sure people had the money they needed when they needed it.
  • Some have called this a β€˜bailout', but it’s not for two reasons. 1) SVB shareholders and creditors will be wiped out and 2) taxpayer money is not being used to do any bailing.
  • Remember: depositors are not creditors. When companies and people put money into their accounts at SVB, they had every reason to expect that it would be there when they needed to withdraw it. They weren’t loaning the money to SVB (as a creditor would), they were depositing money into their own account at SVB for safekeeping.
  • People who say β€œdepositors took a risk by having more than the FDIC insured $250K limit” are, ahem, a bit misguided. (I’m being polite). The truth is that $250K is not that much money for a company, especially of the size and scale of some of SVB's major customers.

Here’s where I think we should go from here.

The Short Term

While SVB’s failure didn’t launch us over the precipice, many people are rightfully feeling very nervous being this close to the edge.

Looking out to the next few weeks, I predict we’ll see venture funding slow way down. It’s been chilly out there recently, but it’s going to be ice cold, piggybacking on the already struggling tech landscape. Writing new checks will take a backseat to checking in on existing investments. VCs will need to assess where their cash is and where their portfolio companies stand, and likewise startups are going to have to start thinking hard about what it means to be lean and extend runway. Hopefully this only lasts a few weeks and the wheels of the machine start turning again before summer.

If there is a positive take on the SVB wreckage, it’s that the Fed will likely slow down the rate of increases. I’d predict a 25, maybe even 0, basis-point increase next week, and I wouldn’t be surprised if there was a rate cut later this year.

Whither venture debt?

Prior to SVB’s failure, it was very common for a startup to have enough cash at SVB for one year of runway, plus a venture debt line for an additional another year. SVB profited from this by charging interest plus warrants and requiring banking exclusivity. It was part and parcel of how they did business, and since they’ve transitioned from success story to cautionary tale, expect to see new regulations prohibiting banks from requiring customer exclusivity in exchange for additional services.

In the immediate term, companies who had venture debt lines with SVB are trying to decide whether to put their cash back in SVB in order to access that venture debt. The whole situation is surreal, since just a few days ago these same companies were scrambling to pull their money out of SVB, and now they are considering returning. There are conflicting reports, but it appears that SVB is allowing these companies to keep a second banking relationship with another bank (so no more exclusivity), but at least half of their cash must be with SVB.

For startups choosing not to access that venture debt line, now trying to figure out how to operate without venture debt (aka less hiring, less spending, less growth), they’re in for challenging times ahead. To fill that funding gap, maybe we’ll see more private lenders step in and provide venture debt as a product. If that is the case, I suspect terms will be tougher and many VCs will recommend against it for their companies.

Another prediction: audit committees of boards will come into play much earlier than they often do now. Given the ever larger seed and Series A/B rounds, it wasn’t uncommon to see startups that had raised $100M+ and had 200+ employees before an audit committee was formed. I suspect these will now be formed upfront and have a much bigger role to play in early stages.

Silver Lining

The good news: the world isn’t ending and won’t in the near future (at least, not because of this). Yes, things will be different and it will take some time to settle into a post-SVB startup environment, but with change comes adaptation. And with adaptation comes innovation, which is what startups are all about.

https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la
OpenAI's $6.6B Power Play: The Future of AI Just Got a Massive Boost πŸ’°πŸš€
Image Source: Open AI - Sam Altman

πŸ”¦ Spotlight

OpenAI is making some exciting moves! The company just completed a massive $6.6 billion funding round, pushing its valuation to an impressive $157 billion. Thrive Capital led the charge, with big names like Andreessen Horowitz and Founders Fund also joining in. This investment will allow OpenAI to further scale its operations and advance AI technologies like GPT-4 across various sectors such as healthcare, entertainment, and business.

But that’s not the only exciting news. OpenAI has also secured an additional$1 billion credit facility, giving the company even more financial flexibility to execute its ambitious growth plans. This safety net ensures that OpenAI has the resources to scale safely and effectively while continuing to lead the AI space.

AI is becoming integral to industries worldwide, and OpenAI’s productsβ€”like ChatGPTβ€”are seeing rapid adoption. From education to enterprise solutions, the company is driving significant advancements in how AI is integrated into everyday life.

Following Microsoft’s $10 billion investment earlier this year, this latest round underscores the market’s confidence in OpenAI’s potential. With its strong focus on responsible AI deployment and ethical scaling, the company is set to shape the future of AI in a way that benefits a broad range of industries and addresses global challenges.

As AI evolves, OpenAI remains dedicated to pushing boundaries while ensuring that its innovations prioritize safety, scalability, and social impact. Keep an eye on this spaceβ€”big things are on the horizon!


🀝 Venture Deals

LA Companies

  • Impulse Space, a Redondo Beach-based company specializing in in-space transportation services, raised $150M in Series B funding led by Founders Fund, bringing its total funding to $225M, to expand its team and advance production of its Helios and Mira vehicles. - learn more
  • Nusano has secured over $115M in Series C financing, led by The Wasatch Group, to accelerate the commercialization of its radioisotope production technology, aimed at improving cancer treatment and medical diagnostics. - learn more
  • Future Trash, a multidisciplinary creative studio, has raised a $5M Seed funding round from TIRTA and General Catalyst to develop original intellectual property (IP) within Fortnite, focusing on building unique in-game content and experiences. - learn more
  • XType, the leading software company for multi-instance management on the ServiceNow platform, has raised a $21M Series A funding round led by Norwest Venture Partners to accelerate innovation and expand its platform capabilities on the ServiceNow platform. - learn more
  • 3Laws Robotics, a robotics company focused on building AI-powered platforms to enhance the safety, security, and operational efficiency of robotic systems, has raised a $4.1M Seed funding round led by TenOneTen Ventures. - learn more

LA Venture Funds
  • Watertower Ventures participated in the $8M Series A funding round for DocJuris, a leader in AI-based contract review and negotiation software that automates key tasks to streamline the contract process for enterprise teams and general counsels. - learn more
  • Progression Fund participated in a $3.7M Seed funding round for Permanent, a company focused on advancing sustainable agriculture by developing solutions that improve soil health and productivity. - learn more


LA Exits

  • Loom, an educational community platform that empowers women by providing comprehensive resources on reproductive health, sexual wellness, and parenting education, has been acquired by women's health brand Perelel, marking a significant expansion in the women's health and wellness sector. - learn more

Download the dot.LA App

βš οΈπŸ“²πŸŒ©οΈ Your Digital Lifeline: Top Tech Apps for Natural Disasters

Living in LA means being ready for anythingβ€”quakes, wildfires, crazy weather, you name it. Luckily, there’s a suite of tech apps designed to keep you informed, connected, and safe when disaster strikes. From real-time alerts to staying in touch with loved ones, these apps have you covered. Here’s the ultimate list to help you handle whatever chaos comes your way in LA County.

Get Real-Time Alerts

Image Source: MyRadar

FEMA App
  • What it does: Provides real-time alerts from the National Weather Service, along with shelter and disaster recovery info.
  • Key features: Weather alerts, shelter locator, and preparedness resources.
  • Available on:iOS | Android
MyRadar Weather Radar
  • What it does: Offers real-time, animated radar for tracking severe weather and storms.
  • Key features: Live radar, storm tracking, and severe weather alerts.
  • Available on:iOS | Android
Clime: NOAA Weather Radar
  • What it does: Delivers real-time radar and weather updates, with wildfire and flood tracking.
  • Key features: Customizable weather alerts, disaster tracking.
  • Available on:iOS | Android
American Red Cross Emergency App
  • What it does: Provides real-time alerts for over 35 types of emergencies, plus disaster preparedness tips.
  • Key features: Alerts, safety check-ins, and emergency tips.
  • Available on:iOS | Android
My Earthquake Alerts & Feed
  • What it does: Sends real-time earthquake alerts, with maps and detailed data.
  • Key features: Earthquake alerts, customizable notifications, detailed maps.
  • Available on:iOS | Android
Citizen
  • What it does: Delivers real-time alerts for emergencies, including natural disasters and crime near your location.
  • Key features: Safety alerts, live incident reports, and community updates.
  • Available on:iOS | Android

Stay Connected with Loved Ones

Image Source: Life360

While social media apps like Facebook and X provide real-time updates, additional tools can help with communication and location sharing, ensuring you stay connected and safe.

Nextdoor
  • What it does: Connects neighbors with real-time local updates on emergencies and community events.
  • Key features: Neighborhood alerts, local info, resource sharing.
  • Available on:iOS | Android
WhatsApp
  • What it does: Enables secure messaging, location sharing, and video/voice calls with family and friends.
  • Key features: End-to-end encryption, location sharing, voice/video calls.
  • Available on:iOS | Android
Zello Walkie Talkie
  • What it does: Turns your phone into a push-to-talk walkie-talkie for communication in low-signal areas.
  • Key features: Push-to-talk, works over Wi-Fi/data, group communication.
  • Available on:iOS | Android
Glympse – Share Your Location
  • What it does: Lets users share real-time locations with family and friends without needing an account.
  • Key features: Location sharing, ETA updates, private tracking.
  • Available on:iOS | Android
Life360
  • What it does: Tracks real-time location of family members and provides emergency SOS alerts.
  • Key features: Family location tracking, emergency alerts, crash detection.
  • Available on:iOS | Android

Stay Mobile

Image Source: PlugShare

For navigating road closures and traffic during disasters, Google Maps and Waze are essential tools that offer real-time updates and alternate routes. Along with these go-to options, there are additional apps that can help you stay mobile when it matters most.

GasBuddy
  • What it does: Locates nearby gas stations and provides real-time updates on fuel availability and prices.
  • Key features: Gas station locator, fuel prices, availability checks.
  • Available on:iOS | Android
PlugShare
  • What it does: Provides a comprehensive map of public EV charging stations worldwide. It offers real-time availability, pricing, user reviews, and photos of charging stations, helping you find the best nearby options.
  • Key features: Real-time station availability, detailed station info, user reviews, and trip planning.
  • Available on:iOS | Android

Traditional Preparedness Tips

In addition to these tech apps, it’s crucial to prepare for natural disasters with traditional methods:

  • Build a disaster kit: Gather essential supplies like food, water, first aid supplies, and a flashlight.
  • Develop an evacuation plan: Determine where you will go and how you will get there in case of an emergency.
  • Keep emergency contacts handy: Make a list of important phone numbers.

Maximize Battery Life and Data During Emergencies

During disasters, power outages and increased network traffic can affect your device's battery life and data usage. Consider the following:

  • Keep your devices charged: Use portable or solar-powered chargers to extend battery life.
  • Conserve data: Use Wi-Fi hotspots when available to avoid excessive data charges.

These apps are your go-to tools for staying informed, connected, and ready for anything in Los Angeles County. Whether you need real-time alerts, navigation assistance, or ways to keep in touch with loved ones, having these apps on hand can make all the difference when it matters most.

Download the dot.LA App

Luxurious Second Home Ownership without the Headache: How Pacaso is Changing the Landscape of Real Estate

πŸ”¦ Spotlight

Pacaso addresses the pain points of second home ownership, offering a luxurious, flexible, and financially sound alternative to traditional second homes and ultra-luxury hotels. Co-founded in 2020 by entrepreneur Austin Allison and former Zillow executive and prominent LA tech figure Spencer Rascoff, Pacaso, an unicorn startup, has redefined vacation home ownership with its unique co-ownership model. Rascoff's contributions to the LA tech scene extend beyond real estate; he also founded 75 & Sunny, an LA-based startup studio and venture fund, and co-founded dot.LA, an LA tech news and events company.

LA residents adore Pacaso for its lush vacation destinations that also make for smart investments. Pacaso offers everything from serene weekend getaways in Aspen to sophisticated escapes in Paris. Each residence, valued between $200k to over $2M for 1/8th, boasts meticulous design, high-end furnishings, and premium amenities. Unlike traditional second home ownership, which involves high costs, maintenance, and underutilization, or ultra-luxury hotels, which lack the personal touch and investment potential, Pacaso's co-ownership model offers a superior solution. Co-owners enjoy the benefits of a high-end vacation home without the full financial burden and hassle of sole ownership, making it a smarter and more flexible choice for discerning buyers.


Image Source: Pacaso

Cabo, Mexico

$822,000 (1/8th ownership)

5 bds. l 5 ba. l 4,969 sq ft

View Here


Image Source: Pacaso

Paris, France

$600,000 (1/8th ownership)

2 bds. l 2.5 ba. l 1,410 sq ft

View Here


Image Source: Pacaso

Malibu, California

$750,000 (1/8th ownership)

3 bds. l 3 ba. l 1,880 sq ft

View Here


Image Source: Pacaso

Park City, Utah

$755,000 (1/8th ownership)

4 bds. l 4.5 ba. l 2,584 sq ft

View Here

Head to Pacaso to learn more about its innovative co-ownership model that addresses the common challenges of second home ownership!


🀝 Venture Deals

LA Companies

  • Oak Essentials, the natural skincare brand founded by Jenni Kayne, has raised an undisclosed amount in Series A Funding from Silas Capital and Unilever Ventures. This investment will drive the brand’s expansion, focusing on product development, boosting marketing efforts, and expanding distribution channels. - learn more
  • Playhouse MD, an upcoming children’s healthcare platform that incorporates play to enhance health outcomes, has raised $4M in funding, according to a recent SEC filing. - learn more
  • FluidLogic, a high-performance hydration system provider, raised $15M in a Series A Extension led by Solyco Capital to support product development and innovation for adventure sports and outdoor endurance categories, with consumer products launching in early 2025. - learn more
  • Reflect Orbital, which uses in-space reflectors to direct sunlight to solar farms and large-scale lighting applications after sunset, has raised $6.5M in seed funding led by Sequoia Capital. The funding will help the company develop production vehicles and expand its team as it builds space-based energy infrastructure. - learn more

LA Venture Funds
  • Smash Capital led a €20M Series B round into Vilnius-based Ovoko, an e-commerce platform for buying and selling used car parts across Europe, marking Smash Capital's first investment in Lithuania. The funds will support Ovoko's product development, market expansion, and team growth as it aims to dominate the European market for second-hand automotive components. - learn more
  • M13 led a $9M Series A Funding Round for Zenlytic, the world’s first self-serve business intelligence platform. - learn more



LA Exits

  • Continuum Global Solutions’ healthcare vertical has been acquired by Everise, a customer service management company, enhancing Everise’s capabilities in pharmacy benefit management and expanding its growth prospects in the healthcare sector. - learn more
  • Radical Semiconductor, a company specializing in processing-in-memory technology, has been acquired by BTQ Technologies, a leader in post-quantum cryptography. This acquisition strengthens BTQ’s ability to secure data in the post-quantum era by integrating Radical Semiconductor's advanced technology portfolio. - learn more

Download the dot.LA App

RELATEDEDITOR'S PICKS
Trending