Silicon Valley Bank's swift collapse was predicated more on the whims of venture capitalist influencers than financial reality, writes JenWieczner
Eventually, the panic reached a tipping point, and even people who’d held faith in SVB had to ask for their money back. After all, there was a lot of risk in keeping it in a bank that might fail, but virtually no downside to moving it. “What I heard was universal: try to get out whatever you can,” says Daniel Schmerin, the co-founder and president of Metaversal, a firm that invests in NFTs and Web3 technology.
The original seed of doubt, though, may well have been inadvertently planted by the bank itself. A press release late Wednesday afternoon from Silicon Valley Bank announced, in a bunch of financial mumbo jumbo, a stock offering involving “1/20th interest in a share” and a sale of assets at a $1.8 billion loss. It was difficult to parse and offered no reassurances.It made sense. WHAT they said, WHO the audience was, WHEN they did it, and HOW they framed it.
One major difference between the GameStop and SVB sagas is the winners and losers each produced. With GameStop, Redditors got rich , and the collapse of the investors shorting the stock at least gave them a sense of perceived victory over an adversary. In the case of Silicon Valley Bank, the startups and VCs who perpetrated the collapse have lost an ally.
Erik Anderson, a former VC turned CEO, had managed to raise a fresh round of financing for his company SIQ Basketball, which makes a “smart” basketball with a corresponding app, just two weeks ago. He had deposited all the money, more than a million dollars, into Silicon Valley Bank. He tried to move the money out on Thursday, but the wire transfer still had not come through after SVB failed.
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