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Behind Silicon Valley Bank’s Partnership With In-Q-Tel, The CIA’s Venture Capital Firm

The failure of the Silicon Valley bank could be seen as a story about national security, as well as America’s struggle to assert itself in a contest for technical dominance against China, and a sign that America’s dependence on the innovation model is more fragile than it seems.

For one, the bank had close connections with In-Q-Tel, a nonprofit venture capital company run by the Central Intelligence Agency, as well as with the Defense Advanced Research Projects Agency.

SVB and In-Q-Tel even hosted a pitch event for venture capital-backed startups to connect with investors, IC representatives, and leading companies and organizations in the artificial intelligence (AI) industry.

In-Q-Tel is a technology private equity firm that helps innovative companies to secure capital from investors. 

SVB, or Silicon Valley Bank, is a specialized bank that provides commercial banking services to companies in the technology and life science industries.

In-Q-Tel, Inc., a non-profit strategic investor that identifies innovative technology for the U.S. Intelligence Community, had an account with Silicon Valley Bank, which provides commercial banking services to the technology, life science and healthcare, private equity, venture capital and premium wine industries. 

After losing $2 billion on the sale of an investment portfolio, the FDIC took control of Silicon Valley Bank on Friday. 

In-Q-Tel and Silicon Valley Bank (SVB) have a long history of working together, with SVB providing financing to early stage startup companies and established venture capital firms. 

Companies that have been supported by SVB include well known tech companies such as Shopify, as well as lesser known startups. 

SVB is a specialized bank that provides financing banking services to companies mostly technology companies in the Silicon Valley area. 

The bank’s core businesses are innovation and expansion for its clients, helping them grow and reach their goals.

In-Q-Tel and Silicon Valley Bank (SVB) have a special relationship as SVB is a specialized bank, providing services for the technology sector. 

It is a national bank that provides signature banking services, insured depositors’ funds, and deposit insurance. SVB has long term investments in startup companies and is the preferred bank for these companies. 

SVB also helps these companies to liquidate money and transfer deposits to other banks. With the Federal Deposit Insurance Corporation’s support, depositors will be able to access their cash on Friday, March 26th 2021. 

With its headquarters in Santa Clara, California, In-Q-Tel is able to access money quickly with SVB’s assistance.

SVB is a strategic investor in the venture capital-backed startups that In-Q-Tel invests in. The bank helps these companies access capital and grow their businesses, which in turn helps create value for their investors. 

In-Q-Tel worked with SVB and its customers to help support innovation by investing in startups.

This includes artificial intelligence (AI) industry investments, which have helped propel Silicon Valley into a position of global leadership for AI development. 

The partnership between In-Q-Tel and SVB has enabled both organizations to build a strong investment portfolio that supports innovation and growth within Silicon Valley’s tech community. 

Over time, this partnership has helped many innovative companies gain access to capital while also helping their investors achieve returns on their investments. 

On Friday, May 28th 2021, In-Q-Tel hosted an event in Santa Clara, California that focused on how they have been able to help numerous innovative companies succeed through their partnership with SVB.

At the event, Darren Anderson, Senior Vice President of Corporate and Investment Banking at SVB, discussed how his team has been able to assist In-Q-Tel’s customers with their deposit insurance needs as well as providing premium wine industry capital. 

Anderson also shared how his team has kept deposits for In-Q-Tel’s customers safe while still providing them with access to capital they need.

During the Cold War, most innovations that were national security-relevant were funded by governments, and then adopted by the private sector.

 In 1964, the federal government was responsible for two-thirds of U.S. R&D spending. In critical fields, such as electronics, this share was higher.

Washington plowed money directly into developing a world-class military, and creating the business spinoffs—the semiconductor, personal computers, Internet—that helped the United States dominate the Information Age. 

In the past few decades, though, investment patterns have reversed: by 2020, the private sector was responsible for 73% of R&D spending. 

When it comes to AI, advanced robotics, satellites, drones, and other capabilities, innovations originating in the private sector that are then adopted by governments will increasingly influence the balance of power.

The downfall of institutions like SVB therefore has geopolitical implications. SVBs clients comprise nearly half of the U.S. VC-backed technology and life-science startups.

Many of the affected firms were smaller-to mid-sized operations, crucial for stimulating greater competition and creativity in the defense industry, which had seen historic consolidation after the Cold War. That acute danger was cauterized by the government’s actions in bailing out the bank’s depositors.

Yet SVBs death spiral revealed two larger, longer-lasting vulnerabilities. First, the U.S. innovation and manufacturing ecosystems, with all of the energy that they produce, are uniquely vulnerable to a single point of failure. In this case, one bank failing to manage its risk almost killed America’s startup industry. In that regard, SVB was sadly not unique.

One of the reasons that America’s defense industrial base is weak is because the Pentagon is generally only able to buy critical components—rocket engines or cruise-missile engines—from a single source. 

Rare-earth metals used in ammunition, or anodes and cathodes used in advanced batteries, overwhelmingly come from the same country that is also America’s biggest competitor: China. Virtually all U.S. innovation and production requires semiconductors, but 65 percent of these semiconductors, and 90 percent of the more complex ones, are made in one potentially military-relevant country, Taiwan.

For years, reliability has been sacrificed to efficiency, a trend that has created obvious weaknesses as the world has grown less stable.

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