A look back at Lehman Brothers offers clues for the fate of Silicon Valley Bank’s $10B venture arm

Two employees of Christie's auction house manoeuvre the Lehman Brothers corporate logo, which was featured in the sale of art owned by the collapsed investment bank Lehman Brothers.
Oli Scarff—Getty Images

The year was 2009 and Lehman Brothers had just recently crumbled. Barclays had purchased most of its North American operations. Bain Capital and Hellman & Friedman had scooped up Lehman’s investment management group. But the fate of one division—Lehman’s venture capital arm, Lehman Brothers Venture Partners—was still up in the air.

The unit, run by an investor named Tom Banahan, dated back to the 1990s when Lehman decided to start taking a stake in startups to help drive its IPO underwriting business. By 2009, when Lehman was no more, the investment bank’s venture arm had some $750 million in capital and was invested in 47 companies from the likes of travel search engine Kayak and shoe company Zappos to visual search engine company SearchMe and travel engine SideStep. Its portfolio held real value, so there were options. Its funds could be sold off, then the investments pillaged off on the secondary market. Or, perhaps, Lehman Brothers Venture Partners could spin off on its own.

It’s a rather unusual kind of situation for a venture capital firm to end up in. And yet, here we are again. This past Friday, the parent company of SVB Capital, the nearly $10 billion venture arm of Silicon Valley Bank, filed for bankruptcy, leaving the fate of the venture arm—a prominent investor in other venture capital funds like Andreessen Horowitz and Sequoia Capital and a direct venture investor in startups—an open question. 

SVB Capital sought to reassure investors over the madness. The venture firm blasted a letter to LPs saying it was still exploring a sale. And SVB Financial Group issued a lengthy release about how SVB Capital was a separate legal entity and would continue to do business as usual. 

But, with a potential sale on the table, perhaps it is worthwhile to look at what happened 14 years ago. After Lehman’s collapse on Sep. 15, 2008, Banahan reportedly stayed up through the night, contacting limited partners and asking for their support. The team members of the fund got to work to buy out Lehman’s stake in the fund and try to spin it off as a separate entity so it wouldn’t have to shut down. Particularly since Lehman didn’t hold a majority stake in the firm, the efforts were successful. By February 2009, Lehman’s venture arm rebranded to Tenaya Capital and spun out from the failed bank, owned by its five partners.

Tenaya Capital is still around today, investing in early to growth stage enterprise and consumer companies, and with those same partners, according to its website. There’s Banahan, Ben Boyer, Stewart Gollmer, Brian Melton, and Brian Paul—all who had been with the fund since its Lehman days. And, since the spinout, they’ve backed the likes of Eventbrite, Fireblocks, HubSpot, and Lyft.

If SVB Capital survives and isn’t sold off to a thrifty buyer, it too would likely operate under a new name, setting it apart from its failed counterpart and offering limited partners and founders a stronger sense of trust. Its investment adviser, which is currently SVB Financial Group, may be recast. Perhaps its general partnership will be recapitalized.

While it may depend on a buyer, SVB Capital may just have a chance.

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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