Silicon Valley Bank Implodes: Tech Startups Scramble to Figure Out Financial Exposure
On Friday, March 10th, 2023, Silicon Valley Bank (SVB) became the second-largest bank failure in US history. Founded in 1983, SVB had become a key lender for tech startups, with clients such as Airbnb, Stripe and Coinbase. It was the 16th largest bank in the U.S., with $210 billion in assets.
The meltdown of SVB was precipitated by a bank run, with the company’s shares falling 60% on Friday morning, after nosediving 60% the previous day. To make up for the decrease in customer deposits, SVB sold off $1.75 billion in shares.
The Federal Deposit Insurance Corporation (FDIC) is acting as receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors. All insured depositors will have full access to their insured deposits no later than Monday morning. Uninsured depositors will receive an “advance dividend within the next week.” within the upcoming week.
Venture capitalists urged tech startups to withdraw their money from the bank amidst fears of contagion effects. Meanwhile, crypto-focused lender Silvergate said it is winding down operations and will liquidate the bank after being financially pummeled by turmoil in digital assets.
The FDIC announced that those who have deposits with SVB, which are usually insured up to $250,000, would be able to access their funds no later than Monday. However, $250,000 is “chump change” compared to what most tech companies stashed in SVB, and reports indicate much of SVB's clientele have way more than just that which may be lost when the dust settles.
The collapse of Silicon Valley Bank has pushed tech investors and startups to scramble to figure out their financial exposure to the bank, with founders worrying about getting their money out, making payroll and covering operating expenses. It is a nail-biting limbo state that many tech startups deeply entrenched in Silicon Valley Bank are now facing in the wake of the bank's implosion.
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