After the crypto market run, Silicon Valley is now facing a run
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After the crypto market run, Silicon Valley is now facing a run
Silicon Valley Bank, a financially strong and historically well-run institution, saw its stock plummet more than 60% on Thursday, wiping out $9.4 billion in market value in a single day.
Navigating Web3 tides with focused insightsOn Thursday, a surprising bombshell hit the U.S. stock market.
Silicon Valley Bank (SVB), a powerful and historically well-run institution, saw its stock plunge more than 60% on Thursday, wiping out $9.4 billion in market value in a single day.
Catalyst Event
Several top-tier venture capital firms, including Coatue and Founders Fund, have advised some of their portfolio companies to strongly consider withdrawing funds from Silicon Valley Bank amid growing concerns about its stability.
According to reports, Founders Fund, co-founded by Peter Thiel—often called the "godfather of Silicon Valley"—has recommended that companies pull money out of SVB due to concerns over its financial stability, stating there would be no negative consequences for doing so.
Meanwhile, Union Square Ventures has told its portfolio companies to “keep only minimal cash balances” in SVB accounts.
Garry Tan, president and CEO of Y Combinator, warned startups in its network that solvency risks at SVB are real and suggested they consider limiting exposure to the lender, ideally keeping less than $250,000.
Tribe Capital has advised numerous portfolio companies: withdraw at least part of their funds if they cannot fully extract cash from SVB.
Activant Capital has informed CEOs of many portfolio companies via email and text messages: encouraging them to move funds from SVB to other banking institutions. The firm is helping some clients transfer capital to First Republic Bank (FRC).
Calls for Calm
Some venture capitalists and founders told media they had difficulty moving funds. Ryan Gilbert, founder of venture firm Launchpad Capital, said SVB’s website was down for over two hours before he finally reached someone at the bank who seemed to have “pulled the plug,” after which most services resumed.
Other VCs urged calm, suggesting the real issue lies in panic itself. Some VC advice circulating is to keep six months’ worth of cash at another bank—but otherwise avoid fueling a potential bank run.
On Thursday, SVB CEO Greg Becker held a conference call urging customers to “remain calm” amid concerns over the bank’s financial health.
Background
On Thursday morning local time, Silicon Valley Bank announced it would incur an $1.8 billion loss from selling portions of its securities portfolio and sought to raise $2.25 billion through issuing common and preferred shares—an action Wall Street interpreted as a panic-driven asset sale and aggressive equity dilution. Rather than reviving investor confidence, this self-rescue effort triggered a sharp decline in SVB’s share price.
Analysts noted that SVB's liquidity crisis spooked investors because it has long been seen as a very strong and well-managed bank. If even SVB is now facing problems, investors can’t help but wonder what this means for other banks with weaker assets and reputations.
SVB has long been one of the most popular financial institutions among tech and life sciences startups. The biggest market fear now is that a bursting tech bubble could spill over into the broader U.S. financial system, potentially reenacting the dot-com crash or even the global financial crisis of the early 2000s.
In a report, Wells Fargo analyst Mike Mayo said SVB’s troubles appear to stem from a “lack of investment diversification.” Higher interest rates, recession fears, and a frozen IPO market have made it harder for startups to raise capital. Wall Street worries that while SVB may simply be unlucky enough to face all these headwinds at once, it could also become the first domino in a larger crisis—just like Lehman Brothers did years ago.
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