Silicon Valley Bank, commonly known as SVB, is a US-based commercial bank that primarily serves technology companies and startups, particularly those in the Silicon Valley region of California. SVB was founded in 1983 and has since grown into a significant player in the tech industry banking sector, with offices around the world.
The bank caters to startups and venture capital firms, as well as private equity, life science, and premium wine businesses. As of 2021, the bank had over 16,000 clients, including more than half of all venture-backed companies in the United States.
Some of the most prominent Silicon Valley startups that bank with SVB include Zoom, Square, and Coinbase, among others. These companies have chosen to work with SVB because of the bank’s deep understanding of the tech industry and its unique banking needs.
SVB offers a range of financial services tailored to startups and tech companies, including commercial lending, cash management, and corporate investment services. One of the things that make SVB different from other banks is its expertise in the tech industry, which allows it to provide specialized advice and support to its clients.
SVB has also established itself as a leader in the venture capital industry, providing financing and advice to startup founders and investors alike. This has helped to build a strong reputation for the bank in the tech community, making it a sought-after partner for tech startups and venture capital firms.
In terms of challenges, SVB has faced criticism for its concentration on serving the tech industry, which some have argued makes it vulnerable to economic downturns or market disruptions. Additionally, the bank’s rapid growth has led to some operational challenges in recent years, including regulatory compliance issues.
SVB Fall : Timeline
On Wednesday, March 8, 2023 SVB was seeking to raise $2.25 billion funds. Two days following the fund raising, panic arose from the venture capital community, leading to the bank being seized on Friday March 10th early afternoon by FDIC. Clients’ deposits are frozen. No one knows how Startups will get their money or run payroll that Friday. It is a complete chaos.
This is the second biggest bank collapse in the history of America since 2008.
The fall is triggered by high interest rates. Some startup clients withdrew closer to $42 billion of deposits by Thursday, to keep their company afloat since private fundraising has become rather hard to orchestrate given the economic climate. Though SVB had felt short of funds and had had to liquidate some of its bonds at a $1.8 billion loss, SVB was cash negative (by $958 million according to filing) by Thursday after close.
Prominent funds such as Union Square and Coatue Management insisted their startups pull money out of SVB immediately. This led to major panic because in a bank run case, no one wants to be last withdrawing.
A bank run at SVB could cause threats to startups, which represent a cash-making machine in America. And that is why Joe Biden has decided to step in by bringing a fix, guaranteeing every client’s funds; making all deposits whole even for those who have more than $250 000 parked at SVB.
HSBC bought the UK division for a symbolic 1 pound ($1.20 USD).
