Pivot Silicon Valley Bank’s Downfall
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Mar 12, 2023 In this insightful discussion, William D. Cohan, a renowned financial journalist and founding partner of Puck News, joins the conversation to dissect the shocking 48-hour collapse of Silicon Valley Bank. He explores the bank's mismanagement and the role of venture capitalists, shedding light on why depositors may—or may not—be fully compensated. Cohan also discusses the broader implications for the tech industry and what this crisis reveals about the need for banking transparency and stability amidst ongoing tech turmoil.
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SVB Collapse Summary
- Silicon Valley Bank (SVB) collapsed in roughly 24 hours due to mismanagement and a bank run.
- The bank invested heavily in overpriced bonds and mortgage-backed securities, leading to significant losses.
Causes of SVB Failure
- SVB's failure stems from mismatched durations (long-term investments, short-term borrowing) and the Federal funds rate increase.
- A concentrated group of VCs triggered a bank run by advising their portfolio companies to withdraw funds.
Notable VC Actions
- Prominent VCs like Andreessen Horowitz, Sequoia, and Peter Thiel's Founders Fund were absent from the group supporting SVB.
- Thiel reportedly withdrew his funds before the collapse, raising questions about potential motives.