A message regarding Silcon Valley Bank

March 13, 2023

On March 13th, Mayfair customers received the below email.

The events surrounding SVB during the past few days have caused a great amount of stress and confusion within the broader startup community. There has been very positive news on this front late afternoon Eastern time, as we expected. Nonetheless, we’d like to provide you with clarity about how Mayfair is positioned.

First, Mayfair does not have any exposure to SVB: we held a minuscule sum of cash at SVB for product testing purposes, and no customer funds were ever transferred to SVB. Our banking product is provisioned by Evolve Bank & Trust, which was chosen by Stripe, our money transmission provider.

Second, our partners Evolve and Stripe also do not have material exposure to SVB. Evolve is clearly a competitor to SVB, and while it would be sensible to assume that Stripe serviced SVB and/or its customers, no Mayfair customer funds are or were ever held by Stripe itself—they are held by Evolve. Stripe provides money transmission services, which means that your instructions to move money in and out of Mayfair are processed by Stripe.

Third, the situation SVB found itself in is relatively unique compared to other banks, including Evolve. We have provided a lengthier analysis of this to our own investors and partners, which we’re happy to share with you upon request. It discusses the SVB balance sheet and accounting in detail, including a history of what has happened. As an abbreviated illustration of the stark difference, here’s a breakdown of SVB’s assets as a percentage of total assets, compared to other large banks and Evolve:

Source: FDIC Financial & Regulatory Reporting, 4Q22

SVB’s balance sheet comprises little cash and a very high proportion of fixed-rate securities, because SVB over the past year made a bet on interest rates staying low for a long time. Balance sheets of all the other banks show a far lower proportion of securities, with the difference being a focus on cash and loans (JPM as a much larger institution has additional balance sheet capabilities, such as selling federal funds and reverse repurchase agreements, which make up the balance).

Furthermore, comparing just SVB and Evolve on a profitability basis at the end of the last quarter, Evolve’s return on assets was almost double that of SVB, and its net interest margin (how much it earns in interest less how much it pays out, in percentage terms) was a third higher than what SVB was able to earn.

We hope this provides some insight into what was SVB’s uniquely vulnerable position. If you suffered material exposure to SVB, we’re sure you had a great deal of anxiety, and we’re pleased to see headlines that mean you will be made whole by Monday morning.

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