The Day Silicon Valley Bank Failed.

It’s been a stunning 48 hours, here in startup land.

Bret Waters
4 min readMar 11, 2023


This morning I got a phone call from a startup founder friend of mine, saying that all her cash at Silicon Valley Bank was frozen. She was panicked about how the hell she’s going to meet payroll on Monday.

Another startup founder told me that he had just closed a $50M round of venture capital — and all of it was sitting in a now-frozen account at SVB. All of it.

It’s been a crazy day here in Silicon Valley and I’ve spent most of the day on calls with smart people, trying to make sense of it all. Special thanks to Jessica Lessin at The Information, and the senior attorneys at Foley & Lardner, both of whom held conference calls about the crisis and let me listen in.

As the business day comes to a close, here are the key bullet points as I understand them:

  1. The proximate cause of this bank failure was that Silicon Valley Bank (SVB) bought a whole bunch of 10-year bonds a year ago without making provisions for the possibility that rates might go up quickly (dramatically lowering the value of those bonds). Meanwhile, Venture Capital funding activity went down which meant that startups who bank with SVB began using up their cash. That meant the bank experienced lower cash reserves than expected and they were forced to sell those bonds at a loss (a staggering $1.8B loss). Word got out, and there was an old-fashioned run on the bank (cue Jimmy Stewart).
  2. Yesterday, Venture Capital firms sent emails to their portfolio companies suggesting they withdraw their funds from SVB, just in case. One particularly-prominent Sand Hill Road VC firm used a WhatsApp group with 1,000 startup founders to broadcast a warning for everyone to take their money out of SVB accounts. The run on the bank turned into an all-out rout, and by the end of the day the bank was insolvent. The Feds came in and put it into FDIC receivership.
  3. A new bank was formed overnight, called the National Bank of Santa Clara, operated by the FDIC, with all the assets of the former Silicon Valley Bank. It happened with stunning speed.
  4. On Monday, depositors will likely be able to access to their funds, up to the amount insured by the FDIC — $250K. That’s going to be a painfully paltry amount for the companies who had millions in their accounts (and payroll due on the 15th).
  5. Depositors who had more than $250K will be issued a certificate for the remaining amount. Those certificates will be redeemable in the future, as funds become available. Some companies may be able to use those certificates as collateral for credit facilities with other banks.
  6. Many companies have “sweep accounts” which automatically sweep cash that isn’t immediately necessary into higher-rate money market accounts at other institutions. If those other accounts are in the customer’s name they won’t be affected. If they are in SVB’s name, customers may never see that money again.
  7. For public companies who were customers, they may need to file an 8-K within four days if their operations are materially affected. Private companies may have some difficult calls with investors.

The good news: Everyone I’ve talked to says this is not a systemic failure like 2008. It’s one regional bank, with a high concentration of one particular customer type. The stock market seems to agree, as stocks of large national retail banks like Wells Fargo and JP Morgan/Chase actually went up today.

And it’s worth noting that the system worked exactly as it’s designed to — the moment the bank suffered a run, the Feds swept in and took over, with the goal of limiting market disruption and stopping contagion to other banks. That’s exactly how it’s supposed to work.

More good news: It seems quite possible that a buyer may be found over the weekend, in which case everyone may be fine by Monday. Bank regulators have shown that their preference always is to solve the problem with a merger or acquirer, not a wind-down. And given the unique nature of Silicon Valley Bank’s customer base, you would think many larger banks might be very interested in the acquisition.

So maybe this all ends well for SVB’s customers. Maybe.

Let me also add that there is no evidence of any malfeasance. I’ve never heard anyone say anything bad about Silicon Valley Bank — they have a reputation for high integrity and great customer service. Everyone I know is rooting for them.

The learnings? Well, for startup founders and CEO’s, the obvious immediate learning is an age-old one: don’t put all your eggs in one uninsured basket. Diversification is your friend.



Bret Waters

Silicon Valley guy. Teaches at Stanford. Eats fish tacos.