Silicon Valley Bank is a U.S. financial institution that specializes in providing banking services to technology and life science companies, as well as venture capital and private equity firms. The bank was founded in 1983 and is headquartered in Santa Clara, California.
Silicon Valley Bank offers a range of financial services, including commercial banking, investment banking, private banking, asset management, and more. The bank has offices in various locations across the United States, as well as internationally in the United Kingdom, Ireland, Germany, Israel, and China. In addition to its banking services, Silicon Valley Bank is known for its research and analysis of trends in the technology and life science industries. The bank publishes reports and surveys on topics such as venture capital activity, fundraising, and startup trends.
Starting in 1987, Silicon Valley Bank began trading its stock on Nasdaq. A year later, the bank completed its IPO and raised $6 million in equity. Initially expanding around Silicon Valley, the bank established an office in Massachusetts in 1990 and began opening offices across the U.S. during the 1990s.
As reported by The New York Times in 2015, after supporting young tech startups during the dot-com bubble of the '90s, the bank narrowly avoided disaster when the bubble burst, and its stock fell more than 50% in 2001.
Over the years, Silicon Valley Bank continued to expand internationally, opening an Israel office in 2008 and a U.K. branch and a joint venture in China in 2012, as stated on the bank's timeline. In the last decade, it established additional offices in Europe and Canada.
As of December 31, 2022, Silicon Valley Bank held $209 billion in assets and $175 billion in deposits, according to regulators. The bank's website claimed that "44% of U.S. venture-backed technology and healthcare IPOs bank with SVB." Despite being among the top 20 largest banks in the country, Silicon Valley Bank wasn't always perceived as a typical bank, like Wells Fargo or Chase.
How is SVB different to Banks?
While many commercial banks tend to prefer established clients, Silicon Valley Bank (SVB) has distinguished itself by forging relationships with startups and tech companies in their early stages, which has enabled it to build strong ties with the venture capital community. This strategy has resulted in a higher percentage of accounts with more than $250,000 in deposits compared to typical banks, with around 90% of SVB's accounts falling into this category. However, this approach also means that SVB is less diversified in terms of its client base and funding sources than larger banks.
As a result of the pandemic, starting in 2020, SVB saw a significant increase in its deposits. This growth in deposits was particularly noteworthy given that SVB has historically been less reliant on deposits as a source of funding.
What went wrong?
SVB's substantial increase in deposits became a significant issue when the bank invested the excess funds in long-term Treasury bonds. The Federal Reserve's decision to raise interest rates subsequently caused the value of government bonds to decline, negatively impacting SVB's investments. Additionally, as the tech sector faced challenges, more depositors withdrew their funds from the bank.
As a result of these developments, SVB recently announced that it was forced to sell a portion of its bond holdings at a loss of $1.8 billion, prompting a bank run. Ultimately, federal regulators stepped in and took control of the bank on March 17th, 2023.
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