On Friday, March 10th, 2023, Silicon Valley Bank, the 16th-largest bank in the United States, suddenly collapsed after a run on deposits.[0] The bank had been a fixture in the venture capital space for decades, providing banking services to early-stage startups that otherwise would have struggled to get financing.[1] The California Department of Financial Protection and Innovation, in response to the sudden bank run, closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver.[2]
SVB’s assets are now under the control of the FDIC, which announced that customers will have access to their insured deposits up to $250,000 this coming Monday.[3] However, more than 93% of domestic deposits were uninsured according to a regulatory filing, leaving many tech companies with millions of dollars tied up in the bank.[4] The FDIC has said that customers will receive an “advance dividend” for a portion of their funds along with “certificates” accounting for their uninsured funds.[5]
The cause of the bank’s failure can be attributed to a number of factors. Ongoing pressure on tech valuations, a closed IPO market, and the fact that SVB had plowed the tens of billions of dollars it took in from venture-capital-backed startups into longer-term bonds led to massive losses.[4] These losses, along with higher interest rates eroding the value of long-term bonds, resulted in a “perfect storm” of conditions that caused Silicon Valley Bank to implode.
The failure of Silicon Valley Bank has sent shockwaves through the financial markets and the tech industry alike, creating uncertainty for the thousands of venture-backed startups that banked with them. With the FDIC taking control of the bank, all insured depositors will have access to their insured deposits by no later than Monday morning.[6] However, there is still much uncertainty for those with deposits that exceed insurance limits, and many tech companies are scrambling to secure new banking partners and funds in order to stay operational.[2]
0. “Silicon Valley Bank Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC” The Intercept, 12 Mar. 2023, https://theintercept.com/2023/03/11/silicon-valley-bank-used-former-mccarthy-staffers-to-weaken-regulations-lobby-fdic/
1. “Investors implore the government to step in after Silicon Valley Bank failure” CNBC, 11 Mar. 2023, https://www.cnbc.com/2023/03/11/silicon-valley-bank-failure-has-investors-calling-for-government-aid.html
2. “What to know about the spectacular collapse of Silicon Valley Bank” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162599556/silicon-valley-bank-collapse-failure-fdic-regulators-run-on-bank
3. “Mark Cuban urges Fed to buy Silicon Valley Bank debt ‘immediately,’ says it’s ‘not the wealthy taking the hit’” Fortune, 11 Mar. 2023, https://fortune.com/2023/03/11/mark-cuban-fed-buy-silicon-valley-bank-debt-immediately-not-wealthy-taking-hit/
4. “Larry Summers warns SVB collapse has ‘consequences” Fortune, 11 Mar. 2023, https://fortune.com/2023/03/11/larry-summers-warns-silicon-valley-bank-collapse-finance-consequences-innovation-ventures
5. “‘There’s going to be more’: How Washington is bracing for bank fallout” POLITICO, 12 Mar. 2023, https://www.politico.com/news/2023/03/12/silicon-valley-bank-fallout-washington-00086662
6. “Most of Silicon Valley Bank’s Deposits Were Uninsured” TIME, 10 Mar. 2023, https://time.com/6262009/silicon-valley-bank-deposit-insurance/