Calling SVB Financial Group’s (NASDAQ:SIVB) Silicon Valley Bank the “Godfather of the Silicon Valley,” Wedbush analyst Daniel Ives weighed in on the impact of its collapse on the tech world.
Cinderella Story Over SVB Tech Startups: When most left Silicon Valley in 2001/2002 following the dot.com burst, SVB remained a bedrock and played a key role in the success of thousands of tech startups over the years, Ives said.
“The Cinderella story is over for SVB and the tech VC/startup with this dark crash ending,” the analyst said. Startups face the tough ask of getting loans and banking relationships with large money center banks or other regional banks that will be “greatly scrutinized funding with a lab microscope,” he added.
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Losers Of SVB Debacle: Ives said he is more concerned about software and tech vendors having significant exposure to tech vertical and small and medium business, or SMB, focus.
As tech companies reduce spending and adjust headcount, the analyst sees the following tech-heavy getting hurt:
- Atlassian Corp. (NASDAQ:TEAM)
- GitLab, Inc. (NASDAQ:GTLB)
- New Relic, Inc. (NYSE:NEWR)
- Twilio, Inc. (NYSE:TWLO)
Gitlab said on its earnings call on Monday that hiring slowdowns and workforce reductions at some of its customers impacted its expansion/upsell, Ives noted. A pullback in spending and headcount adjustment could be a headwind for developer tools and their vendors, he added.
For companies such as GitHub, Twilio, Engage, PagerDuty, Inc. (NYSE:PD) and Datadog, Inc. (NYSE:DDOG), which saw above-average growth in unique users in 2022, any slowdown in user growth or headcount reductions could be a headwind, Ives said.
M&A To Pick Up Pace: Ives sees an acceleration in M&A within the startup ecosystem. He also sees late-stage start-ups seeking alternative financing and in some cases speeding up the IPO path.
“We believe Big Tech will be potential winners and could be much more aggressive,” the analyst said. He expects tech M&A to be up at least 20% in 2023 from a year ago. The assumption is based on the premise that more early- and late-stage private companies will see valuations dropping and potentially seek suitors in a much more constrained financial environment post the SVB historical debacle.
The Technology Select Sector SPDR Fund (NYSE:XLK) traded up 1.93% at $139.14, according to Benzinga Pro data.
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