Silicon Valley Bank (SVB) is a bank that primarily serves technology startups and venture capital firms. It was founded in 1983 and quickly became the go-to bank for Silicon Valley's tech community with $209 billion in total assets at the end of last year.
On Wednesday, March 9, 2023, SVB faced financial difficulties that led to its demise in under 48 hours. On Friday, March 10, 2023, the state took over the Bank and appointed the Federal Deposit Insurance Corp. as receiver to wind it down with all deposits up to $250K FDIC insured.
Bets on Long Term Treasury Bonds & Mortgage Backed Securities
As Feds interest rates continued to increase in 2023, the bonds that they bought when interest rates were lower are now worth less than they were before. SVB reported a $1.8 billion loss from the sale of U.S. treasuries and mortgage-backed securities. This doesn't include unrealized losses that are still sitting in their books at more than $17 billion.
Focused on a Single Customer Group
SVB could've held onto these bonds until maturity but because they primarily serve startups and VC firms that's been hit hard due to rising interest rates, customers have been withdrawing money out of the bank more aggressively than usual. Deposits fell from nearly $209 billion at the end of March 2022 to $173 billion at year-end 2022. SVB needed to cover for these withdrawals through the sale of bonds and securities.
Loss of Trust
Peter Thiel, a predominant and influential figure in the VC world of Founders Fund had asked its investors to transfer the money to other banks instead. That left SVB with a negative cash balance of $958 million at the close of business on Thursday March 10, 2023.
List of Companies Affected
SVB failed due to a combination of factors, including poor investment choices, over-reliance on a single set of clients (tech), and loss of trust.
Sunrun has cash deposits with SVB totaling nearly $80 million
Roku has cash deposits with SVB totaling around $487 million
Sangamo Therapeutics (NASDAQ:SGMO), with $34.4M in deposits
Protagonist Therapeutics (PTGX) said that it has $13M in cash at the bank
Eiger BioPharmaceuticals (NASDAQ:EIGR) said it has ~$8.3M at SVB (SIVB)
Circle has $3.3B with SVB
BlockFI has $227 million in funds held at SVB