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Lessons from the Collapse of Silicon Valley Bank


Silicon Valley Bank, often referred to as the “financial partner of the innovation economy”, was a major player in the tech sector and had been since its founding in 1983.[0] It was the go-to bank for many venture capital firms, funded nearly half of all US venture-backed startups, and served as a hub for the tech industry.[1] Unfortunately, the bank recently became the largest US bank to fail since the Great Recession and the second largest in US history after Washington Mutual in 2008.[2]

What caused the collapse of Silicon Valley Bank (SVB)?[3] Low interest rates, easy money, and plentiful loans had been driving the tech sector up for years and SVB had been riding the wave of success.[4] The bank had taken on too much risk, however, by taking in deposits mainly from the tech sector.[5] When the pandemic caused a tech industry downturn, SVB’s depositors began to withdraw their money in a panic, leading to a bank run.[2] The bank attempted to recoup some losses by selling assets, but ended up selling $21 billion at a $1.8 billion loss.[6] On Friday, March 8th, the Federal Deposit Insurance Corporation (FDIC) took control of SVB.[5]

The FDIC helped to insure all depositors, but the vast majority of SVB’s customers had deposits well in excess of the FDIC’s $250,000 cap, leaving many of them in a bind. SVB was uniquely flexible about lending tech startups money, offering venture debt and lines of credit to those who may have been unable to qualify for conventional bank financing.[7] This focus on tech startups, as well as offering services to VCs and founders who weren’t US citizens, made the bank vulnerable to risk when the tech sector took a downturn.

The collapse of SVB has sparked concerns about the banking sector as a whole and other lenders, especially smaller regional ones, have seen their stock values plummet in response.[8] Moving forward, investors may be more wary of banks that are too heavily concentrated in tech, or in any one sector. To stave off a catastrophic run at another bank, the Federal Reserve has made funds available to other institutions to help shore up their cash reserves.[9]

The collapse of Silicon Valley Bank is a cautionary tale of the dangers of taking on too much risk.

0. “PR-16-2023 3/10/2023” FDIC, 12 Mar. 2023,

1. “What is Silicon Valley Bank? The bank’s collapse, explained.”, 12 Mar. 2023,

2. “Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023,

3. “The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed” CNN, 13 Mar. 2023,

4. “Opinion | The Boys Who Cried ‘Woke!’” The New York Times, 14 Mar. 2023,

5. “The collapse of Silicon Valley Bank, explained visually” USA TODAY, 14 Mar. 2023,

6. “Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023,

7. “Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023,

8. “After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023,

9. “U.S. government steps in to shore up deposits at Silicon Valley Bank and another failed institution” CBS News, 13 Mar. 2023,

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