SVB’s Two-Day Bank Run (2023) - QuickFinanceStories

It took 48 hours. That's how fast Silicon Valley Bank went from "fine" to "gone." The second-largest bank failure in American history. And it happened at the speed of a group chat.

This is that story. Silicon Valley Bank was the bank for tech startups. Venture capitalists.

Founders. The entire startup ecosystem. For 40 years, it worked perfectly.

When tech boomed, deposits poured in. During COVID, the boom went into overdrive. Stimulus money.

Zero interest rates. Record venture capital funding. Startups raised billions and parked their cash at SVB.

Deposits tripled - from $60 billion to $189 billion in two years. SVB needed to put all that cash somewhere. They chose long-term government bonds and mortgage-backed securities.

They chose long-term government bonds and mortgage-backed securities.

Safe investments. Government guaranteed. Unless interest rates go up.

Then the Federal Reserve started hiking. Aggressively. From near zero to over 5%.

The fastest rate increases in 40 years. Those "safe" bonds lost massive value. SVB was sitting on $17 billion in unrealized losses.

As long as they didn't have to sell, everything was fine. Then they had to sell. As the tech downturn hit, startups started burning through their cash.

Deposits were leaving. SVB needed money. On March 8th, 2023, SVB announced it had sold $21 billion in bonds at a $1.8 billion loss.

And needed to raise $2.25 billion more. Translation: "We're in trouble." Founders texted founders. VCs sent urgent emails to their entire portfolio.

Group chats exploded. Peter Thiel's Founders Fund told companies to pull their money. "Get your money out.

Now." The digital bank run began. By the next day, customers had tried to withdraw $42 billion. In a single day.

That's a quarter of all deposits. No bank in history can survive that. On March 10th, regulators seized SVB.

The FDIC stepped in. The government guaranteed all deposits - even those above the $250,000 insurance limit. To prevent the panic from spreading to other banks.

But SVB was gone. 40 years of history, ended in a weekend. SVB showed us something new: In the age of smartphones and social media, bank runs don't take weeks. They take hours. And by the time you see it coming, it's already too late.