{"id":2276,"date":"2023-03-14T08:02:56","date_gmt":"2023-03-14T13:02:56","guid":{"rendered":"https:\/\/embarrdowns.com\/lessons-from-the-collapse-of-silicon-valley-bank\/"},"modified":"2023-03-14T08:02:57","modified_gmt":"2023-03-14T13:02:57","slug":"lessons-from-the-collapse-of-silicon-valley-bank","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/lessons-from-the-collapse-of-silicon-valley-bank\/","title":{"rendered":"Lessons from the Collapse of Silicon Valley Bank"},"content":{"rendered":"

Silicon Valley Bank, often referred to as the \u201cfinancial partner of the innovation economy\u201d, was a major player in the tech sector and had been since its founding in 1983.[0]<\/a><\/sup> 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]<\/a><\/sup> 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]<\/a><\/sup><\/p>\n

What caused the collapse of Silicon Valley Bank (SVB)?[3]<\/a><\/sup> 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]<\/a><\/sup> The bank had taken on too much risk, however, by taking in deposits mainly from the tech sector.[5]<\/a><\/sup> When the pandemic caused a tech industry downturn, SVB\u2019s depositors began to withdraw their money in a panic, leading to a bank run.[2]<\/a><\/sup> The bank attempted to recoup some losses by selling assets, but ended up selling $21 billion at a $1.8 billion loss.[6]<\/a><\/sup> On Friday, March 8th, the Federal Deposit Insurance Corporation (FDIC) took control of SVB.[5]<\/a><\/sup><\/p>\n

The FDIC helped to insure all depositors, but the vast majority of SVB\u2019s customers had deposits well in excess of the FDIC\u2019s $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]<\/a><\/sup> This focus on tech startups, as well as offering services to VCs and founders who weren\u2019t US citizens, made the bank vulnerable to risk when the tech sector took a downturn.<\/p>\n

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]<\/a><\/sup> 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]<\/a><\/sup> <\/p>\n

The collapse of Silicon Valley Bank is a cautionary tale of the dangers of taking on too much risk.<\/p>\n

0. <\/span>“PR-16-2023 3\/10\/2023” FDIC, 12 Mar. 2023, https:\/\/www.fdic.gov\/news\/press-releases\/2023\/pr23016.html<\/a><\/a><\/p>\n

1. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

2. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

3. <\/span>“The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed” CNN, 13 Mar. 2023, https:\/\/www.cnn.com\/2023\/03\/13\/tech\/tech-industry-relief-silicon-valley-bank\/index.html<\/a><\/a><\/p>\n

4. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

5. <\/span>“The collapse of Silicon Valley Bank, explained visually” USA TODAY, 14 Mar. 2023, https:\/\/www.usatoday.com\/story\/graphics\/2023\/03\/13\/graphics-bank-collapse-silicon-valley\/11466073002\/<\/a><\/a><\/p>\n

6. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

7. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

8. <\/span>“After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/14\/1163135286\/silicon-valley-bank-collapse-fallout-whats-next<\/a><\/a><\/p>\n

9. <\/span>“U.S. government steps in to shore up deposits at Silicon Valley Bank and another failed institution” CBS News, 13 Mar. 2023, https:\/\/www.cbsnews.com\/news\/silicon-valley-bank-deposits-guaranteed-signature-bank-federal-reserve-fdic\/<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Silicon Valley Bank, often referred to as the \u201cfinancial partner of the innovation economy\u201d, was a major player in the tech sector and had been since its founding in 1983.[0]<\/a><\/sup> 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]<\/a><\/sup> 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]<\/a><\/sup><\/p>\n

What caused the collapse of Silicon Valley Bank (SVB)?[3]<\/a><\/sup> 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]<\/a><\/sup> The bank had taken on too much risk, however, by taking in deposits mainly from the tech sector.[5]<\/a><\/sup> When the pandemic caused a tech industry downturn, SVB\u2019s depositors began to withdraw their money in a panic, leading to a bank run.[2]<\/a><\/sup> The bank attempted to recoup some losses by selling assets, but ended up selling $21 billion at a $1.8 billion loss.[6]<\/a><\/sup> On Friday, March 8th, the Federal Deposit Insurance Corporation (FDIC) took control of SVB.[5]<\/a><\/sup><\/p>\n

The FDIC helped to insure all depositors, but the vast majority of SVB\u2019s customers had deposits well in excess of the FDIC\u2019s $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]<\/a><\/sup> This focus on tech startups, as well as offering services to VCs and founders who weren\u2019t US citizens, made the bank vulnerable to risk when the tech sector took a downturn.<\/p>\n

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]<\/a><\/sup> 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]<\/a><\/sup> <\/p>\n

The collapse of Silicon Valley Bank is a cautionary tale of the dangers of taking on too much risk.<\/p>\n

0. <\/span>“PR-16-2023 3\/10\/2023” FDIC, 12 Mar. 2023, https:\/\/www.fdic.gov\/news\/press-releases\/2023\/pr23016.html<\/a><\/a><\/p>\n

1. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

2. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

3. <\/span>“The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed” CNN, 13 Mar. 2023, https:\/\/www.cnn.com\/2023\/03\/13\/tech\/tech-industry-relief-silicon-valley-bank\/index.html<\/a><\/a><\/p>\n

4. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

5. <\/span>“The collapse of Silicon Valley Bank, explained visually” USA TODAY, 14 Mar. 2023, https:\/\/www.usatoday.com\/story\/graphics\/2023\/03\/13\/graphics-bank-collapse-silicon-valley\/11466073002\/<\/a><\/a><\/p>\n

6. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

7. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

8. <\/span>“After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/14\/1163135286\/silicon-valley-bank-collapse-fallout-whats-next<\/a><\/a><\/p>\n

9. <\/span>“U.S. government steps in to shore up deposits at Silicon Valley Bank and another failed institution” CBS News, 13 Mar. 2023, https:\/\/www.cbsnews.com\/news\/silicon-valley-bank-deposits-guaranteed-signature-bank-federal-reserve-fdic\/<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":2275,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2276"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=2276"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2276\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/2275"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=2276"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=2276"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=2276"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}