Silicon Valley Bank

Silicon Valley Bank was a commercial bank founded in 1983 and headquartered in Santa Clara, California, serving technology and life sciences companies.⁹¹² On March 10, 2023, regulators closed the bank and the FDIC took over its deposits, marking the second-largest bank failure in U.S. history.²⁵¹² The failure followed a bank run triggered by concerns over the bank's financial health, with depositors withdrawing $42 billion on March 9, 2023.³⁵⁷⁹

Timeline

Money raised

At year-end 1983, SVB's assets were approximately $18 million.⁹ Between 2019 and 2021, SVBFG tripled in size, with assets growing 271 percent from year-end 2018 to year-end 2021.⁹ As of year-end 2022, SVBFG had approximately $212 billion in total assets, and its principal subsidiary SVB had approximately $209 billion in assets.⁹ SVB's deposits swelled from $60 billion in Q1 2020 to $200 billion in Q4 2022.¹² On March 8, 2023, SVB announced a completed sale of $21 billion of available-for-sale securities for a $1.8 billion after-tax loss.⁹ SVB planned an equity offering of $2.25 billion to strengthen its capital position.⁹ On March 9, 2023, depositors withdrew $42 billion from Silicon Valley Bank.³ SVB's stock price reached $747 in late 2021 and closed at $268 on March 7, 2023, before becoming worthless.¹²

Investors named in the sources: Founders Fund³, Y Combinator⁵.

What happened

Silicon Valley Bank was founded in 1983 and headquartered in Santa Clara, California.⁹¹² The bank provided financial services to technology and life sciences companies, focusing on early-stage startups.⁹ SVB's client base was heavily concentrated in venture capital-backed technology and life sciences companies.⁹ Between 2019 and 2021, SVB tripled in size, driven by exceptional client liquidity during low interest rates.⁹ SVB invested a large portion of client deposits in long-dated, held-to-maturity government or agency-issued mortgage-backed securities.⁹

As interest rates rose in 2022, the value of SVB's bond portfolio fell, leading to unrealized losses.⁹¹² In 2022, venture capital activity fell sharply, leading to slower deposit inflows and increased outflows as clients burned cash.⁹ On February 23, 2023, the Financial Times published an article highlighting SVB's large securities portfolio and unrealized losses.⁷⁹ On March 8, 2023, SVB announced a restructuring, including the sale of $21 billion of available-for-sale securities at a $1.8 billion loss and a planned $2.25 billion equity offering.⁹ The announcement triggered a loss of confidence among depositors and investors.⁷⁹

On March 9, 2023, depositors withdrew $42 billion from SVB, nearly a quarter of its deposits, in a bank run.³ Venture capital firms, including Founders Fund, advised portfolio companies to withdraw funds from SVB.³ SVB's systems became overloaded, and some customers could not access their accounts.³ On March 10, 2023, California regulators closed SVB and appointed the FDIC as receiver.²⁵⁷¹² The FDIC transferred SVB's assets to a newly created bridge bank, the Deposit Insurance National Bank of Santa Clara.⁵

Insured depositors were promised access to their funds up to $250,000 by Monday, March 13, 2023.³⁵ Approximately 94% of SVB's deposits were uninsured as of year-end 2022.⁹ On March 12, 2023, federal regulators announced that all depositors would be protected, including uninsured deposits.⁷¹² The Federal Reserve created the Bank Term Funding Program to help other banks meet depositor outflows.¹² Silicon Valley Bank UK was sold to HSBC on March 13, 2023, protecting UK depositors.⁷

SVB's parent company, SVB Financial Group, filed for Chapter 11 bankruptcy protection.¹⁷¹⁸ The bankruptcy court set August 11, 2023 as the bar date for filing proofs of claim.¹⁸ Several securities class action lawsuits were filed against SVB, its executives, underwriters, and auditor.¹⁷¹⁸ In June 2024, Judge Glenn ruled that a bar date can extinguish indemnification and contribution rights against a debtor.¹⁸ The FDIC, Treasury, and Federal Reserve stated that shareholders and certain unsecured debtholders would not be protected, and senior management would be removed.¹²

Roku disclosed that about 26% of its cash, $487 million, was deposited at SVB and largely uninsured.⁵ Payroll provider Rippling used SVB to transfer salaries and had to switch to JPMorgan Chase, warning customers of potential delays.³ Some startups, like Camp.com, launched emergency sales to generate cash flow.³ Y Combinator CEO Garry Tan estimated that nearly one-third of YC startups would not be able to make payroll in the next month without access to funds.⁵ The FDIC could not immediately find a buyer for SVB's assets, signaling the speed of the bank run.⁵

SVB's failure was the second-largest bank failure in U.S. history after Washington Mutual in 2008.⁵¹² The Federal Reserve's review found that SVB had a deficient risk management program and unrealistic interest rate models.¹⁷ SVB's held-to-maturity securities portfolio grew 500% in a single year, and unrealized losses approached 95% of shareholders' equity.¹⁷ The U.S. government stated that no taxpayer money would be used in the resolution of SVB.⁷¹² The collapse of SVB affected about half of all VC-funded startups in the US and UK.³

SVB's stock price fell 60% on March 9, 2023, and trading was halted before the market opened on March 10.⁵¹⁰ The bank's failure was attributed to a liquidity crisis resulting from excessive withdrawals, not poor lending practices.¹² SVB's assets were transferred to a bridge bank, and depositors were given access to their funds on March 13, 2023.⁷¹² The FDIC, Treasury, and Federal Reserve announced that senior management would be removed from SVB.¹² SVB's parent company, SVB Financial Group, filed for Chapter 11 bankruptcy in the Southern District of New York.¹⁷¹⁸

The bankruptcy court's bar date ruling was appealed, but the parties ultimately settled, allowing late claims in agreed-upon amounts.¹⁸ The Federal Reserve's report found that SVB's risk management deficiencies were directly linked to its collapse.¹⁷ SVB's failure led to investigations by Congress, the DOJ, the SEC, and other regulators.¹⁷ The bank's collapse caused significant disruption for startups, with some unable to make payroll or pay vendors.³⁵ SVB's customers included nearly half of U.S. venture-backed technology and life sciences companies.⁹

The bank's deposits were heavily uninsured, with only about 3% of customer deposits protected by deposit insurance in the UK.⁷ SVB's failure was the largest bank failure since the 2008 financial crisis.¹⁵ The FDIC's takeover of SVB was announced on Friday, March 10, 2023.²⁵ SVB's collapse was triggered by a loss of confidence following the announcement of its securities sale and capital raise.⁷⁹ The bank's stock was part of the S&P 500 index and it was the 16th largest U.S. bank at the time of failure.¹²

Legal outcomes

• filedA securities fraud class action was filed against SVB's former executives, underwriters, and auditor KPMG LLP.¹⁷
• pendingThe court denied motions to dismiss the securities class action on June 13, 2025.¹⁷
• settledMorgan Stanley, Cooper, and DeChellis filed late proofs of claim in SVB's bankruptcy case, which were initially denied but later settled.¹⁸
• settledThe bankruptcy court's decision on bar date was appealed, but the parties entered into a stipulation resolving the dispute.¹⁸
• pendingCongress, the DOJ, the SEC, and other regulators commenced investigations into SVB's collapse and insider trading.¹⁷

Where the founders are now

Senior management was removed as part of the regulatory resolution.¹²

Sources

1. The Silicon Valley Bank Collapse Explained - UW School of Law, law.uw.edu, Mar 24, 20
2. Regulators take over Silicon Valley Bank, bankingdive.com, Mar 10, 20
3. The Collapse of Silicon Valley Bank, The Pragmatic Engineer, 2023-03-13
5. One of Silicon Valley's Top Banks Fails; Assets Are Seized, NBC Bay Area, Mar 10, 20
6. What Silicon Valley Bank's collapse means for private equity, pestakeholder.org, Apr 27, 20
7. Affected by the silicon valley bank insolvency?, legislate.ai, Apr 10, 20
9. Evolution of Silicon Valley Bank, federalreserve.gov, May 18, 20
10. Silicon Valley Bank scrambles to reassure clients after 60% ..., reuters.com, Mar 10, 20
12. Silicon Valley Banks Failure | Wespath Investment Resource, Wespath, 2023-03-14
17. Silicon Valley Bank ("SVB") | Current Cases | Kessler Topaz, Kessler Topaz
18. Lessons From the Silicon Valley Bank Chapter 11: Preserving Indemnification and Contribution Rights | Skadden, Arps, Slate, Meagher & Flom LLP, skadden.com, Sep 4, 202

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