Actually, I think what they're talking about is that VCs have a lot of investments they would not dump more money into. They use these investments as collateral for loans, based on some kind of valuation (which, given the lack of price discovery is arbitrary). Essentially, they're zero value investments. If these investments were repriced, the actual value of the VC fund would fall.
As the interviewee indicates, if the uninsured depositors had not been bailed out, the VC firms would have had to decide to put more of their "dry powder" (on a temporary basis) into these startups until their deposit claims were adjudicated. the VCs would not have done that, even if they knew they'd get all of it back when the dissolution was complete. That means that the 10 million investment in a 1 billion dollar unicorn currently on their books would suddenly be worthless.
Instead, they're going to continue to carry it at $10 million because there's no price discovery on these highly illiquid assets. Essentially, the last price discovery was when they made the investment which caused the value to be set.
54% of SVB’s loan book was loans “to” VCs and PEs, but they weren’t loans based upon the funds’ portfolio holdings. They were Capital Call lines, based on the power of the VC to demand that its LPs make good on capital commitments.
(Yes, the fund portfolio holdings were pledged as additional collateral here but that’s secondary. The only thing that could make the CCLOC outstandings get marked down is if the well-heeled institutions and individuals who’ve committed to VC funds stop making their capital calls.)
Even SVB is not crazy enough to lever up against VC portfolio marks.
As the interviewee indicates, if the uninsured depositors had not been bailed out, the VC firms would have had to decide to put more of their "dry powder" (on a temporary basis) into these startups until their deposit claims were adjudicated. the VCs would not have done that, even if they knew they'd get all of it back when the dissolution was complete. That means that the 10 million investment in a 1 billion dollar unicorn currently on their books would suddenly be worthless.
Instead, they're going to continue to carry it at $10 million because there's no price discovery on these highly illiquid assets. Essentially, the last price discovery was when they made the investment which caused the value to be set.