Silicon Valley Bank collapse and sends tech startups scrambling

Last Updated on March 12, 2023 3:53 PM CDT

The second-largest failure of a financial institution in the US happened Friday morning when Silicon Valley Bank collapsed due to a bank run and capital crisis. On Wednesday SVB announced that it sold a bunch of securities at a loss and, in an effort to shore up its balance sheet, that it would sell $2.25 billion in new shares. This triggered a panic among venture capital firms who advised companies to withdraw their money from the bank and may have been worsened by more startups feeling strapped for cash and needing to withdraw funds. California regulators closed down the tech lender and put it under the US Federal Deposit Insurance Corporation (FDIC) control. The FDIC is currently acting as a receiver which normally means that it will liquidate the bank’s assets to pay back its customers including depositors and creditors. However, the government agency said all insurance depositors will have full access to their insured deposits no later than Monday morning and it would pay uninsured depositors  an “advance dividend within the next week.” American billionaire investor and hedge fund manager, Bill Ackman, suggested a bailout and compared SVB’s failure to Bear Stearns, the first bank collapse at the start of the 2007-2008 global financial crisis.

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