The Defense Department organization tasked with connecting relevant tech companies to private capital says it is “monitoring national security-related impacts” stemming from the prominent startup lender’s demise.
The Defense Department’s Office of Strategic Capital has been “heads-down in assessing impacts to national security” resulting from the collapse of Silicon Valley Bank, or SVB, according to an email Sunday from the OSC director seen by Nextgov.
The bank’s dramatic collapse on Friday set off a weekend panic across the tech sector—which has experienced mass layoffs and a market slowdown over the past year—before federal officials announced emergency measures on Sunday to backstop depositors with money at the failed bank.
OSC, which launched in December 2022, serves as the Pentagon’s hub for connecting “companies developing critical technologies vital to national security with capital.” DOD said in a press release last year that the office will help startups overcome the industry’s ‘Valley of Death,’ where companies developing innovative technologies often struggle to receive the long-term financing needed “to bridge the gap between the laboratory and full-scale production.”
In a March 12 email to OSC’s ‘engagements’ listserv with the subject line “National Security Impacts of SVB,” OSC Director Jason Rathje said the office’s mission “relies on strong public-private partnerships,” and added that “many of the small businesses affected by the SVB failure are not only organizations that have worked alongside us, but also employ close friends, including reservists and veterans we’ve had the opportunity to serve with.”
“Over the past 48 hours, we have been actively collaborating with our DOD and other government colleagues to advocate for our national security community and provide insight into ongoing mitigation efforts,” Rathje said in the email. “We are constantly monitoring national security-related impacts to the crisis, and we are looking forward to providing more information as it becomes available.”
OSC did not respond to requests for comment, and a DOD spokesperson deferred all questions about Silicon Valley Bank to the Treasury Department, which took steps over the weekend to mitigate the potential economic and financial fallout from the bank’s collapse.
In a joint statement released on Sunday, Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin Gruenberg said that Secretary Yellen “approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors.”
The statement said all depositors would have access to their money on Monday, adding that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
Although federal intervention will help stem a broader financial crisis across the startup ecosystem, some analysts have voiced concern that the collapse of SVB—the largest bank to fail since 2008—could portend a broader slowdown in startup investments and venture capital funding for nascent companies.
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