Silicon Valley Bank Collapse Leaves Tech Industry in Limbo
On Friday morning, Silicon Valley Bank, a key financial institution for tech start-ups, collapsed and was taken over by federal regulators.[0] The financial crisis for SVB began Thursday when the bank reported a $1.8 billion loss on bond sales in the first quarter of 2023 and revealed it had taken a sharp drop in deposits from its venture capitalist and start-up clientele. To make up for the losses, the bank planned to raise $2.25 billion in additional capital.[1]
The FDIC is now in charge of the bank and has said that all insured depositors will have full access to their deposits up to $250,000 on Monday morning. SVB had $174 billion in deposits and more than 85% of those were uninsured, leaving the fate of depositors with more than $250,000 in SVB uninsured.[0] The FDIC has said that uninsured depositors will receive an advance dividend within the next week, as well as a “receivership certificate” for the remaining amount of their funds.[2]
The collapse of Silicon Valley Bank has caused a great deal of anxiety in the tech industry.[3] SVB had become a centerpiece of finance in the tech industry, providing financing to almost half of US venture-backed technology and health care companies.[4] Now, tech startups are left with questions about cash flow and access as the FDIC moves in.[5] Furthermore, a toy company based in New York has been caught up in the collapse and is begging customers for help to keep it afloat.[6]
The bank's swift fall had much to do with its clientele of Silicon Valley start-ups and the venture-capital and private-equity firms that fund them.[7] The bank had become a go-to bank and lender to startups in the tech sector and a crucial part of the ecosystem.[8] In addition, SVB had invested much of its money in Treasury bonds that don’t mature for years, and with the Federal Reserve raising interest rates, prices of the bonds have fallen, creating billions of dollars in paper losses for SVB.[9]
Silicon Valley Bank had become the go-to lender for tech startups and was a crucial part of the tech ecosystem, but the bank's collapse has left many startups and venture capitalists in a state of limbo.[10] The FDIC is now taking over control of the bank and has said that insured depositors will have full access to their deposits up to $250,000 on Monday morning.
0. “SVB’s 44-Hour Collapse Was Rooted in Treasury Bets During Pandemic” Yahoo News, 11 Mar. 2023, https://news.yahoo.com/svb-spectacularly-fails-unthinkable-heresy-222710493.html
1. “Why the SVB-Triggered Selloff Is a Buying Opportunity in Big Bank Stocks” Barron's, 10 Mar. 2023, https://www.barrons.com/articles/bank-stock-buy-svb-52ee8b9e
2. “Tech CEO with millions in Silicon Valley Bank: ‘Innovation in the startup world is bleeding today'” Fox Business, 10 Mar. 2023, https://www.foxbusiness.com/technology/tech-ceo-millions-silicon-valley-bank-innovation-startup-world-bleeding-today
3. “Silicon Valley Bank collapse leaves start-ups scrambling to pay workers” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/technology/2023/03/11/silicon-valley-bank-startups-payroll/
4. “Investors implore the government to step in after Silicon Valley Bank failure” CNBC, 11 Mar. 2023, https://www.cnbc.com/2023/03/11/silicon-valley-bank-failure-has-investors-calling-for-government-aid.html
5. “Silicon Valley Bank Collapse Leaves Tech Industry Scrambling For Answers” Crunchbase News, 10 Mar. 2023, https://news.crunchbase.com/venture/silicon-valley-bank-impact/
6. “NYC toy store Camp begs customers for help following Silicon Valley Bank collapse” New York Post , 11 Mar. 2023, https://nypost.com/2023/03/11/nyc-toy-store-camp-begs-for-cash-after-silicon-valley-bank-crash/
7. “Opinion | Silicon Valley Bank’s collapse reflects the tech sector’s deep anxiety” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/opinions/2023/03/10/silicon-valley-bank-collapse-tech-sector/
8. “Silicon Valley Bank imploded in a single day. It could just be the tip of the iceberg.” Yahoo Finance, 11 Mar. 2023, https://finance.yahoo.com/news/silicon-valley-bank-imploded-single-100000239.html
9. “‘This hit like a ton of bricks': Troubles at Silicon Valley Bank ripple across Boston tech scene” The Boston Globe, 11 Mar. 2023, https://www.bostonglobe.com/2023/03/10/business/troubles-silicon-valley-bank-ripple-across-boston-tech-scene
10. “Silicon Valley Bank failure could wipe out ‘a whole generation of startups'” NPR, 11 Mar. 2023, https://www.npr.org/2023/03/11/1162805718/silicon-valley-bank-failure-startups
