In brief
Perhaps I am naïve, but I am almost certain that, prior to February 2023, I had never heard of Silicon Valley Bank (SVB).1 The first time I became cognitively aware of SVB was in early 2023, when many of my venture-capital friends in Israel started moving money out of the country in response to the Israeli government’s proposed court overhaul that would give the government a larger voice in the selection of judges while limiting the Supreme Court’s power to strike down legislation. Many investors and companies recognized that such reform would harm democracy and the economy, and thus made the decision to move their funds abroad.2 Unlike the anecdotal stories I had been hearing that very little money was moving from Israeli banks to Swiss banks, it was the exact opposite for SVB.3
Fast forward one month, and those same people who had moved their money out of large Israeli banks were panicking, because now they could not access the funds recently moved to SVB. Just two short weeks later, SVB, one of the leading private banking names in the venture capital arena, no longer existed.4
This article appears in the second edition of the Private Wealth Newsletter 2023.
Click here to read the full alert.
1 SVB was formed in 1983 after co-founders Bill Biggerstaff and Robert Medearis came up with the idea during a poker game. SVB went public in 1988 and moved to Menlo Park in 1989 to establish a presence in the venture capital area. SVB nearly tripled in size between 2019 and 2022, when it rose from the 34th largest commercial bank in the US to the 16th largest. See Erin Gobler, "What Happened to Silicon Valley Bank," available here.
2 See, for example, Multibillion-dollar Startup Verbit to Leave Israel Over Judicial Overhaul, CEO Announces
3 On Thursday, 9 March 2023, in response to SVB's announced USD 1.8 billion loss on its bond portfolio, investors and depositors attempted to pull USD 42 billion dollars out of SVB. See: $42 billion in one day: SVB bank run biggest in more than a decade . On 13 March, the Times of Israel reported that Israeli banks were able to transfer USD 1 billion from SVB to Israeli accounts before the bank was seized by government regulators: Tel Aviv shares drop as SVB failure triggers cash-flow concern for Israeli startups.
4 SVB was shut down by the California Department of Financial Protection and Innovation on 10 March 2023, two days after it announced its USD 1.8 billion loss on its bond portfolio and the plans to sell common and preferred stock to raise USD 2.25 billion. The following day, the stock of SVB's parent company, SVB Financial Group, crashed upon the market's opening, and more SVB customers began withdrawing and attempting to withdraw their money (approximately USD 42 billion in attempted withdrawals). On 17 March, SVB Financial Group filed for bankruptcy. First Citizens Bank acquired SVB on March 26. See Erin Gobler, "What Happened to Silicon Valley Bank," available here.
