How SVB Prospered (and Collapsed) With Silicon Valley Startups

  • last year
Silicon Valley Bank built its business on venture capitalists and their fledging startups, and it ultimately led to its downfall. It became a bank for startups by catering to those that weren’t profitable and would have a hard time securing a line of credit or a loan from a larger bank. When SVB gained a startup client, the bank convinced borrowers to put all their deposits there, giving the lender would have collateral for loans. When its clients lost access to their accounts, they had to rush to find ways to make payroll and pay their overhead until the federal government stepped in to backstop all deposits at the bank. When the Fed started raising interest rates, startup capital dried up, causing a decline in deposit flows, and SVB began selling assets to meet customers’ liquidity needs.

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