It’s now been a year since Silicon Valley Bank (SVB) and Signature Bank—then two of the tech sector’s biggest banking partners—were suddenly shut down.
While the impact is still fresh for many—SVB alone supported over 40% of venture-backed tech and healthcare companies in the U.S. at the time—it’s important to consider the broader consequences of these abrupt closures:
- Just after the SVB news broke on Friday, March 10, 2023, the four largest U.S. banks lost about $50 billion in market share, and more than $80 billion in stock market value disappeared from the 18 banks in the S&P 500.
- The shockwaves were felt worldwide, with markets in Asia and Europe dropping as HSBC and Barclays shares fell by 4.8% and 3.8%, respectively, after the news.
Bank customers haven’t forgotten. While SVB has since restructured and returned to venture capital, many businesses that banked with SVB remember the uncertainty of not knowing if they could make payroll.
For CFOs, that weekend felt endless—until the FDIC finally announced it would protect all SVB depositors through the Deposit Insurance Fund (DIF).
This is worth repeating after recent remarks by U.S. Federal Reserve Chair Jerome Powell, who cautioned that more bank failures are likely unavoidable due to several key market factors.
Let’s break down what Powell’s recent statements to the Senate Banking Committee mean for innovative companies, how today’s market compares to past banking crises, and why a diversified capital strategy is essential to keep liquidity flowing—no matter the market.
Mid-sized banks face the greatest risk
“This is a problem we’ll be dealing with for years to come. There will be bank failures,” Powell warned during a March 7 hearing on the Fed’s monetary policy before the Senate Banking Committee.
While that’s a stark warning, Powell clarified that—unlike the 2008 banking crisis—he expects future closures to spare the largest lenders. That’s largely because many of the biggest banks were designated “systemically important” (in other words, too big to fail) after the 2008 financial crisis.
“It’s not a first-order issue for any of the very large banks. It’s more the smaller and mid-sized banks that are facing these challenges. We’re working with them. We’re getting through it. I think it’s manageable, is the word I would use,” he said.
At the core of these tighter lending conditions are falling commercial real estate values, which have dropped in nearly every major market worldwide since the pandemic. Simply put, with fewer employees returning to offices, expensive real estate is no longer a must-have for many companies.
As a result, many commercial real estate investment trusts (REITs) have been in the red since early 2024. This is setting off a chain reaction: With fewer workers downtown across North America, not only are office spaces empty, but there are also fewer shoppers to support local retail.
Instead of quick fixes, Powell has signaled that this ‘secular change’ in the economy—while difficult as more mid-sized banks consolidate—will need to be reflected in how lending works moving forward.
While Powell hasn’t detailed the regulatory steps planned to shield the most vulnerable banks from negative REIT exposure, the Fed has at least been proactive in reaching out to the institutions they see as most at risk.
“We’re in talks with them: Do you understand the problem? Do you have enough capital? Enough liquidity? Do you have a plan? You’re going to take losses here—are you being honest with yourself and your owners?” Powell told Senate leaders.
What does this mean for innovation funding?
These warnings about bank failures are closely linked to broader challenges in the global business landscape. Commercial REITs and retail are just two pieces of a much larger puzzle that affects interest rates, inflation, and the tighter lending environment many companies face today.
As we’ve discussed previously on the blog, these are some of the factors putting downward pressure on EBITDA forecasts for CFOs in the middle market and beyond.
By the numbers, Gartner expects:
- Only 2% revenue growth through 2027 (based on weak GDP forecasts);
- A 5 percent jump in labor costs across the US and Eurozone;
- An 8 percent increase in technology costs globally;
- US long-term inflation of 3 percent through the end of the decade.
To avoid a downward spiral like SVB and Signature Bank, many banks will focus on short-term payback risk for their investments until labor and material costs better match consumer demand over the next decade.
This means companies seeking outside funding will need longer operational and development runways. As we recently discussed with saascan founder Lauren Thibodeau on our podcast, lenders now expect at least an 18–24+ month runway before bringing a company into their portfolio—up from just 12 months a few years ago.
But as Gartner VP of Research Randeep Rathindran explained in a recent report, “CFOs can help their organizations reduce reliance on high-interest debt by broadening their view of funding sources beyond bank loans and corporate bonds.”
“Financial leaders should look at secondary equity offerings, venture capital, and non-dilutive financing options […],” Rathindran added.
How innovation can extend your runway and boost value
A powerful—but often overlooked—source of non-dilutive funding is R&D tax credits. CFOs can use these credits to reinvest a portion of the capital they’re already putting into product development.
Each year in the U.S., companies can claim up to $500,000 to offset payroll, income, or other tax liabilities tied to R&D as part of the IRC Section 41 tax credit. That means up to $500,000 in cash can stay in your company’s bank account each year if your team secures a successful claim with the IRS.
Canada’s SR&ED program also supports R&D-focused CCPCs of every size and industry, delivering nearly $4 billion in funding to over 22,000 innovative Canadian companies in 2021 alone.
Altogether, that’s more than $20 billion in available R&D tax credits—helping innovative businesses keep cash on hand and double down on value creation.
But on both sides of the border, making these claims requires fluency not just in the language of innovation, but also in the tax code—whether it’s the CRA or IRS.
Your partner for non-dilutive funding
By combining decades of combined human expertise in navigating tax code—while also being a team of founders in our own right—with a platform that synchronizes key financial, project workflow and payroll data into a single system of proof, Boast leaves no stone unturned in digging deeper to uncover all of your credit-worthy activities.
When it comes to investors, companies that leverage these non-dilutive funding opportunities show they’re smart with their budgets—making them stronger candidates for investment than those who leave R&D tax credits on the table.
When companies receive government funding to fuel innovation, it signals to investors that their R&D is so impactful and innovative that even the federal government wants to back their success.
That could be one of your most powerful assets when pitching your solution to potential investors.
To learn how Boast combines cutting-edge technology with deep expertise in the innovation ecosystem to deliver the industry’s leading R&D tax credit solution, talk to one of our experts today.
