One of the most key financial events of 2023

1. SVB crash explained
what happened?
who SVB?
but why did this happen?

2. Loan
$$
interest
(SVB’s earnings)
Unlike a usual bank, SVB couldn’t earn on loans
since it’s customers (startups) were cash rich
from in 2020-21. SVB then invested 56% of it’s
portfolio in govt. bonds…
“Someone borrow
money from me so I
can charge you
interest and make
profit” - SVB
“Imma
give you
loads of
money”
Startup founders
Investors
“We don’t need no
loans anymore. We
got loads of cash.”
SVB
Reason 1 of 3 | SVB over-indexed on govt. bonds
SVB’s deposits were growing…but not pro
fi
t…

3. which was okay, until…
Reason 1 of 3 | SVB over-indexed on govt. bonds

4. Reason 2 of 3 | Macro-economic conditions changed
interest rate soared, value of bonds fell…

5. SVB’s deposits shrank in the funding winter, SVB needed to raise 2 billion…
Reason 2 of 3 | Macro-economic conditions changed
interest rate soared, value of bonds fell…

6. speculation over $2 bn fund raise caused panic
(and perhaps, Silvergate’s collapse added to it)
Reason 3 of 3 | bank run
Other factors: sharp hike in interest rates by Fed, gaps in Fed policy
enforcement and poor risk management at SVB

7. why was this signi
fi
cant?
Startups fear OpEx shortage, employee furloughs

8. govt. bailout? investor loans? customer bailout? bank takeover?…
what happens next?

9. meanwhile, some comic relief ;-)

10. what could SVB have done differently?

11. https://www.independent.co.uk/business/collapse-of-silicon-valley-bank-uk-
could-have-big-impact-on-tech-startups-b2298696.html
https://www.netinterest.co/p/the-demise-of-silicon-valley-bank
https://www.ftadviser.com/investments/2022/09/01/how-interest-rates-a
ff
ect-
bond-prices/
https://www.npr.org/2023/03/11/1162805718/silicon-valley-bank-failure-
startups#:~:text=Press-,Silicon%20Valley%20Bank%20failure%20could%20wip
e%20out%20'a%20whole%20generation,depositors'%20money%20will%20be
%20returned.
https://www.thedailybeast.com/roku-etsy-vox-media-companies-impacted-by-
silicon-valley-bank-crash
https://www.bloomberg.com/opinion/articles/2023-03-10/startup-bank-had-a-
startup-bank-run?leadSource=uverify%20wall
Sources