The Shocking Collapse of Silicon Valley Bank: Lessons for Entrepreneurs and Investors

The collapse of Silicon Valley Bank (SVB) in March 2023 has sent shockwaves through the entrepreneurial community, sparking concern about the future of startup funding and the risks that entrepreneurs face when building their companies.[0] SVB was a niche player, providing mortgages only to elite VC partners or successful startup founders.[1] The bank had concentrated its loans in start-up firms, which did not trigger any of the usual red flags among regulators because the firms covered a variety of industries.[2] The small group of venture capitalists (VCs) provided funding for the borrowing companies.[2] When you provide funding to a cluster of businesses that are primarily supported by a small group of venture capitalists, those investors become the focal point since they hold the purse strings.[2] SVB, which is supposed to serve what is widely viewed as the most dynamic and innovative sector of the global economy – tech – had parked a huge quantity of its deposits in low-yield government-backed securities and low-interest bonds.[3] As the Federal Reserve increased interest rates, the worth of the bonds decreased, leading to a traditional bank panic as customers rushed to retrieve their funds.[3] The bank was overwhelmed by the massive growth in deposits from its tech clients – and neither it nor they could find anything worthwhile to invest in.[3] The precise causes of the bank’s collapse are, of course, debatable; yet the basic structural context and its main lessons seem clear.[3] Nonetheless, the recent collapse of Silicon Valley Bank, Signature Bank, and Credit Suisse was a harsh reminder of how quickly a trusted institution could fail, putting billions of dollars at risk.[4]

0. “The Demise of SVB and Its Impact on Startups” EE Times Europe, 3 Apr. 2023,

1. “In aftermath of Silicon Valley Bank collapse, will housing market feel fallout?” Redwood City Pulse, 5 Apr. 2023,

2. “Will banking change after the collapse of Silicon Valley Bank?” The Philadelphia Inquirer, 5 Apr. 2023,

3. “Dylan Riley, Drowning in Deposits — Sidecar” New Left Review, 4 Apr. 2023,

4. “‘SVB’s failure could and should have been prevented’: Experts argue for better regulation and supervision by the Fed” CNBC, 3 Apr. 2023,