Silicon Valley Bank (SVB) was founded in 1983 and is headquartered in Santa Clara, California, and abruptly closed today! It was announced by the Federal Deposit Insurance Corporation (FDIC) on Friday, marking the worst U.S. financial institution failure in nearly 15 years.
SVB was the 16th largest bank in the United States until Friday afternoon. It failed after anxious depositors rushed to withdraw money over concern for the bank's health. On March 9th, over 42 Billion dollars was withdrawn, and FDIC took over as a receivership.
SVB was connected to a number of Silicon Valley industries and startups. Y Combinator, an incubator startup that launched Airbnb, DoorDash, and DropBox, regularly referred entrepreneurs and StartUps to them.
Some of the Silicon Valle popular funds, including Union Square Ventures and First Round Capital, blasted emails to their entire rosters of startups in recent days, instructing them to pull funds out of SVB on concerns of a bank run. Social media only made the panic worse as money was pulled out.
50% of US venture-backed tech and life sciences companies bank with SVB
Silicon Valley Bank was a keystone of the tech ecosystem and has long been the preferred bank for startups of all stripes. It has invested equity in or provided venture debt to at least 543 companies over the course of its existence, per PitchBook data.
Roku warns it has $487M held in deposits with Silicon Valley Bank
"This is an extinction-level event for startups," Y Combinator CEO Garry Tan said.
"I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, ‘Do I have to furlough my workers?’"
Does Silicon Valley Bank's fall remind us of Washington Mutual's closure in 2008?
Washington Mutual had over $300 billion in assets when it collapsed. It was sold to Chase by the FDIC, with any remaining WaMu branches becoming Chase branches.
By the end of 2022, SVB had around $209 billion in total assets. Its total deposits numbered $175.4 billion.
The FDIC will make deposits below the $250,000 limit available on Monday, though it is unknown how many account deposits were above the limit.
According to the White House, Treasury Secretary Janet Yellen is watching SVB "closely." But the White House asserts that post-2008 reforms will prevent a further economic meltdown.
“The precipitous deposit withdrawal has caused the Bank to be incapable of paying its obligations as they come due,” the California financial regulator stated. “The bank is now insolvent.”