Writer’s note: We’re breaking from our usual formatting this week because there was a once-in-a-generation collapse of one of the biggest banks in the country. Today’s space has been dedicated to our coverage on the matter, but we will be back to broader programming next week.
What a surreal stretch for tech. Silicon Valley Bank's collapse, and its new life under the ownership of regulators, has certainly warranted its fair share of hot takes, real policy implications, and questions about the future of where startups keep their money. After spending hours speaking to founders and venture capitalists about Silicon Valley Bank's surprising collapse, there's one shared feeling: whiplash.
Instead of tossing you a half-baked take, as you can go to Twitter.com for those, I think the best way to understand the SVB story is to read it day by day. The fast unfolding nature, the unprecedented Twitter-fueled bank run, and what exposure tells us about the interconnected nature of it.
Here's a timeline of the stories we’ve written about the SVB crash so far, to be updated as the story develops:
Thursday, March 9
Shares of Silicon Valley Bank began tanking sharply Thursday in the wake of the company’s announcement that it is raising additional capital by selling stock, taking a charge to roll over an asset portfolio to higher-yielding assets and extending its term-borrowing capacity.
After SVB announced that it intended to sell shares in pursuit of more capital, some VC firms, including but not limited to USV, Founders Fund, Hustle Fund, Inspired Capital and Valor Equity — advised startups to pull money out of SVB. Some advised diversification.
Connie Loizos delves deeper in how SVB's actions led to the abrupt shut down Friday morning. She reports:
You might imagine that someone at Silicon Valley Bank would have paused to think: “Hmm, maybe today is not the right time to declare that we’re shoring up our balance sheet.” Evidently, they did not. Instead at the end of the market close Wednesday, they put out a convoluted press release that was received so badly that it was almost comical. Except that Silicon Valley Bank has long been a trusted financial partner to many startups and venture firms that began nervously scrambling to figure out what to do.
One source tells TechCrunch that parts of the SVB site is down, as well as one of its client support phones, despite using different browsers and apps to try to move their capital. Another says that account access controls are now view only, meaning that users cannot conduct withdrawals or wires. Others on Twitter say that they’re unable to log into the online banking portal at large. One VC tells me that, because the website is down, portfolio founders are at SVB bank branches currently asking for cash to be released.
Friday, March 10
The FDIC sent a release Friday to announce that SVB has been closed by regulators, which are now in charge of the bank's deposits. While banking activities in SVB’s 17 branches were closed Friday, SVB’s operations will resume on Monday, March 13 — this time, with the FDIC in charge.
Alex Wilhelm penned a much-needed recap on the timeline of events leading up to SVB's collapse. Bullet points, we need more of them. In the piece, he asks: "Why did the bank go from saying it was well capitalized yesterday to what appears to be a fire sale so soon?"
TechCrunch spoke to over a dozen founders about how the bank’s crash is impacting their business. In this piece, we highlight some of the stories, ranging from announcing fears that they can’t make payroll to putting together a timely discount code and blasting it out as a Hail Mary.
My colleague Alex Wilhelm asked one of the biggest questions out loud so founders don’t have to: How are startups going to pay for stuff if SVB is still locked up? In his TC+ analysis, he explains that entrepreneurs should be thinking about more than making payroll. How are they going to pay cloud vendors or process refunds? (I told you it's a human story.)
This piece seeks to dismantle the idea that SVB’s fall is a net positive for its competitors. Mary Ann Azevedo and I spoke to a few startups that are experiencing an influx in demand: Some are cautious; some are excited. The question remains: Will startups that have been screwed by a traditional bank now run the risk of turning to a private tech startup to hold their funds? Where do you go when you’re reminded of risk?
TC's Rebecca Szkutak writes about how the bank's collapse could affect the increasingly hot venture debt market. She reports that "not all players will be pulling back, and nonbanking lenders — many of whom are flush with cash — are in a great position to capitalize on the gap SVB leaves. Private lenders that have traditionally focused on venture debt, including Hercules, Western Technology Investment and Runway Growth Capital, may see a flurry of opportunity."
Saturday, March 11
TC's Kirsten Korosec and Mary Ann Azevedo report that "the dust has yet to settle in the largest bank run in U.S. history, a collapse that in just 48 hours dismantled the tech startup-focused Silicon Valley Bank."
"But already a debate is raging in the venture capital community and investors are picking sides. On Friday, a group of more than two dozen venture capital firms issued a joint statement that supports Silicon Valley Bank. The statement was notably after — and not before — Federal Deposit Insurance Corporation regulators closed the bank and took control.
And the posthumous show of support keeps growing. By midday Saturday, more than 100 venture firms had added their names to the joint statement. There are also some noticeable absences on the list, including a16z, Founders Fund, Sequoia Capital and Y Combinator," the story reads.
Serial entrepreneur and venture capitalist Garry Tan is less than three months into his new job as the CEO of Y Combinator, one of the most famed accelerator programs in tech. And it seems like it’s been an eventful onboarding process thus far. Along with pretty much every other corner of the startup world, YC was also affected by Silicon Valley Bank’s collapse: 30% of companies are exposed through SVB and are at risk of not being able to make payroll, he tweeted Saturday. He has spun up a petition, with over 1,000 signatures and counting, to call on congress to take swift action.
Brex CEO Henrique Dubugras is currently working to raise over a billion dollars in a weekend to help fund an emergency bridge credit line that he believes will help startup customers impacted by Silicon Valley Bank’s collapse be able to make payroll next week. Dubugras declined to comment on how much capital has been committed for the credit line thus far, but said he’s on back to back calls trying to get funds locked down.
Founders and venture capitalists aren’t the only ones experiencing volatility right now: Silicon Valley Bank employees are seeing their jobs in flux as their employer falls apart. SVB, which was closed down yesterday, is now being run by regulators. And while employees are no longer employed by the bank, they got an e-mail from “the office of the CEO” saying that they have jobs for the next 45 days at 1.5x their current salary.
Over 60 YC-backed Indian startups have more than $250,000 stuck in accounts with Silicon Valley Bank, first reported by TechCrunch. Nearly two dozen of those startups have more than $1 million tied with the lender, according to a survey by and among the startups seen by TechCrunch, illustrating how the worst bank failure since the 2008 financial crisis is also impacting firms 8,000 miles away.
The fallout from the collapse is impacting a range of startups and larger firms including, as we know now from SEC filings, publicly traded companies like Roku, Roblox, Quotient, and others. Roku said in a filing that it had around $487 million held at SVB, representing around 26% of its cash and cash equivalents as of March 10, 2023, as Variety was first to report. Its remaining balance of $1.4 billion is distributed across other large financial institutions, it said.
The move could affect as much as 30% of UK tech startups, with potentially 10% in trouble, industry sources estimate. As of Saturday, TechCrunch understands an influential group of U.K. entrepreneurs and investors, aided by industry body Coadec, is now making hasty representations this weekend to HM Treasury over the implications of SVB U.K.’s shut down.
Sunday, March 12
Treasury secretary Janet Yellen said on Sunday that the U.S. government would not bail out Silicon Valley Bank but is concerned about depositors reeling from what is the worst bank failure since the 2008 financial crisis and will try to help them, TC's Manish Singh reports.
According to Bloomberg, an auction for SVB's remaining assets is reportedly underway Sunday, with final bids due Sunday afternoon. Bloomberg reported that the U.S. Federal Deposit Insurance Corp. (FDIC), which stepped in and shut down SVB on Friday as it was experiencing an unprecedented run on funds by its clients, is hoping to conclude the auction before markets open on Monday morning.
Across the Atlantic, after a frantic weekend involving regulators and the U.K. government, Silicon Valley Bank UK Limited (SVB UK) — which is a legally separate company to SVB in the U.S. — is expected to enter an insolvency procedure Sunday, as we reported yesterday. The move was confirmed today by London law firm Osborne Clarke.
The Federal Reserve issued a joint pair of statements on Sunday with one clear message: Silicon Valley Bank’s depositors, both insured and uninsured, will receive help in a manner that will “fully protect” all. Depositors, the statement reads, “will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
Monday, March 13
The deal is a massive relief to the U.K. technology sector, which was highly exposed to the collapse of both SVB and its U.K. arm. The quick turnaround of the deal will be seen as a signal of the government’s support of tech, and overall confidence in the financial system.
Signature Bank provided banking services to real estate companies, law firms and cryptocurrency companies — around 30% of the bank’s deposits came from the crypto industry. That crypto angle is the reason why Silicon Valley Bank and Signature Bank became intrinsically connected. As the SVB implosion started unfolding on Friday, the crypto industry grew increasingly concerned about the financial stability of their banking partners.
As of the time of writing, equity shares of First Republic were off more than 65% and trading was halted as mentioned.
The explanation behind the surprising return of SVB is that the FDIC transferred deposits and assets of the former SVB “to a newly-created, full-service FDIC-operated ‘bridge bank,” the e-mail describes. “All wire payments entered on March 9 or 10 that have not already been processed have since been canceled. If you wish to consummate those transactions, you need to reinitiate them.”
Tuesday, March 14
Tim Mayopoulos, the former CEO and executive at Fannie Mae, said that the future of the bank is still being charted out, but added that depositors’ actions will impact these decisions. In a private Zoom meeting run by SVB for a select number of LPs and investors, he asked clients to return deposits to the institution: “That’s the single-most important thing you can do to ensure that Silicon Valley Bank survives.”
Shares of First Republic fell 62% on Monday. Investors, concerned that actions taken over the weekend by the American government to stem a potentially budding banking crisis might not be sufficient, sold First Republic and other, related banking stocks like PacWest and Western Alliance.
Alex Wilhelm reports that today (March 14) they are all on the bounce: First Republic is up around 57% as of the time of writing, PacWest is up 76% and Western Alliance is up a comparatively modest 44%.
As always, you can follow me on Twitter or Instagram to continue the conversation. Those with information on SVB and its fall out, whether you are an employee, founder and venture capitalist can send me tips at email@example.com or on Signal at +1 925 271 0912. My Twitter DMs are also open.
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