The Ugly Lessons of Silicon Valley Bank’s Collapse

At first glance, The failure of the Silicon Valley Bank seems to be a financial caper cut and dry. The 16th largest bank executives in the US made the wrong choices when dealing with a seemingly random situation – a client list, a wealth of venture capital, billions of dollars in deliveries. cash to keep in the organization’s safe. But the bank’s leaders misjudged the risks of higher interest rates and inflation. Combine that with a small tech downturn, and bank spreadsheets start to turn colors. When news of its perilous situation broke, panicked depositors withdrew their funds. After the government takes over, everyone’s money is safe.

But even though none of the depositors lost their money, the story was like a traumatic event whose consequences would last for months, even years. Things happened that we couldn’t see. The story of SVB reminds me of what my wife, a real-life crime investigation reporter, said when people asked why she found murder stories so interesting. A murder reveals formerly private, concealed actions that define how people live, she said. During the criminal investigation, seemingly ideal lives from the outside are exposed as uncreated secrets and lies.

Start with the bank. As has been widely reported – only now with a critical eye – Silicon Valley Bank is not only the bank of choice for Silicon Valley companies, but also an attractive cheerleader for startup culture. Venture capitalists and angels that fund new companies will regularly send entrepreneurs to the bank, which typically handles both the corporate accounts and personal finances of the founders and directors operating. SVB will be partying with techies—and winemakers, another area they’re deeply involved in. Some bankers have wine fridge in their office. Hello!

Normally, you have to take my family hostage before I become a banker—I imagine button-up prig who hired Mary Poppins. But I might think differently if banking were a world of parties, high-end Cabernets, and elbow-scratching with over-the-top geniuses who keep millions of dollars in the bank and offer mortgages. big mortgage. By all accounts, the SBV shared and perhaps amplified the freewheeling vibes of the parasites it serves. This is not what you necessarily want from a trust. And as we learned this week, the CEO of SVB passionate report one of the worst things a founder can do – sell off stocks when the going gets tough.

When that trouble hit, we also learned a lot about the investment lords of the Valley, who gave the founders the millions of dollars they needed to grow quickly and make everything. rank. When SVB’s weaknesses began to leak, VCs who claimed to be the smarts in the tech industry had a choice: help bolster a financial partner holding the industry’s assets, or withdraw immediately. ie. The second course will cause a panic that will guarantee disaster for the startup ecosystem — but no Friendbecause you are the first in line.

Despite years of discussion about how companies in the tech world are uniting together on a mutually beneficial mission, some of the biggest players have turned to self-preservation mode, essentially firing guns. starter pistol for bank withdrawal. One notable relief leader is Peter Thiel’s Founders Fund, which became aware of SVB’s troubles and consulting for all his companies to get out as soon as possible. As rumors spread, a classic banking race took shape, with other VC firms call for withdrawal, until unable to connect online with SVB to transfer money. At a time when a group of investors ventured together support commitment for SVB, its virtual doors are closed. In a frenzy to the lifeboats, hundreds of companies were trapped on deck. When the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank last Friday, with all operations frozen, holders in the bank far exceeded the $250,000 limit on Insured accounts really face the abyss.


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