Sorry Silicon Valley: SVB’s Collapse Is Not a Big Deal
March 11, 2023
guest post by Jeremiah Jackson
In a world in which finance has become dizzyingly complex and specialties have grown ever narrower, it is refreshing to observe a classic bank run in the form of Silicon Valley Bank (SVB) collapse.
SVB is a holding company containing a broker-dealer and a bank. Only the banking component appears to have failed. This is the second largest bank failure in U.S. history, and in a weakening economy, panic has set in. SVB’s downturn coincided with widespread decline in banking stocks and for good reason. Around half of all VC-backed startups do business with SVB. It is a critical player in biotech, cybersecurity, and social media, but really the name says it all: it was the most important publicly traded bank specializing in Silicon Valley. SVB was so ubiquitous that startups were encouraged or felt pressure to work with the bank to gain access to venture capital……
Although SVB is classified as a systematically important financial institution, if SVB’s 10-K’s are reported accurately, then there is little systemic risk even in the fire sale scenario…..
SVB is a minor player in investment banking and has a weak role as a financial intermediary in most of the economy outside Silicon Valley. Silicon Valley will take a large hit. Some startups will be dissolved. Innovation will slow down in the short-term. However, as long as the technologies deployed by the startups have positive returns, they are likely to be rediscovered and redeployed in fairly short order.
https://www.revolver.news/2023/03/sorry-silicon-valley-svbs-collapse-is-not-a-big-deal/