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- Silicon Valley Bank, a once-trusted banker to startups, was closed down by regulators on Friday.
- The collapse sent shockwaves through the industry as startups worried about logistics and payroll.
- SVB became the latest casualty of a bank run as VCs and founders rushed to protect their funds.
Only last month, Silicon Valley Bank ranked among the top 20 in Forbes’ list of best US banks of 2023.
By Friday afternoon, the once-trusted bank of venture capital investors and tech startups was closed down by regulators, in what has now become the second-largest bank failure in the US.
Any deeper, long-standing reasons behind SVB’s sudden collapse will no doubt unfold in the coming days, but the coup de grâce appeared to be a traditional bank run. On Thursday, more startup founders moved to make withdrawals, apparently rattled by SVB’s falling stock and the losses that the bank took on the sale of $21 billion in bond investments.
The bank had already been experiencing headwinds from “continued higher interest rates, pressured public and private markets, and elevated cash burn,” Greg Becker, the CEO of Silicon Valley Bank, wrote to investors on Wednesday.
Becker left the board of the San Francisco Federal Reserve Bank on Friday, according to a report by Reuters.
While some tech founders had at first advised against anxious moves, they couldn’t turn a tide that exploded into an all-out crash — the stock of the bank, which said it served about half of US startups that venture capital firms invested in, had dropped about 86% by Friday.
As part of the closure, Federal Deposit Insurance Corporation, the agency that helps insure customers’ bank funds, has now taken control of SVB. The agency is prioritizing returning insured deposits within days, and devising ways to offer recoveries for customers with uninsured deposits, it said in a statement on Friday.
A representative for SVB did not respond to Insider’s requests for comment.
SVB’s now historic collapse puts it second only to the fall of Washington Mutual during the 2008 subprime mortgage crisis, according to data from the FDIC.
The latest fallout will pose administrative and existential questions in a tech industry already shaken up by layoffs — What kind of recoveries can customers with uninsured deposits expect? How will startup companies handle logistics, as many are already fretting about how they’ll pay employees now? Will SVB find any buyers?
Read Insider’s coverage so far of SVB’s dramatic downfall:
Silicon Valley is turning on its bank
SVB plummets 60% after higher interest rates spark billions in losses on a $21 billion bond portfolio
As Silicon Valley Bank’s troubles incite panic, some tech founders call for calm: ‘We have a collective responsibility’
Silicon Valley Bank has been shut down by regulators
Silicon Valley Bank crisis: Everything you need to know about SVB Financial as regulators shut down the bank
Silicon Valley Bank is the biggest US bank collapse since Washington Mutual during the 2008 financial crisis
NYPD called to Silicon Valley Bank branch to respond to ‘disorderly group’ after SVB’s shocking collapse
Startups that use Silicon Valley Bank are freaking out over whether they’ll make next week’s payroll: ‘Our money is gone’