In the early 2000s, Silicon Valley Bank (SVB) was one of the most prominent players in the technology banking sector. The bank focused on providing financial services to technology startups, SVB was well-positioned to capitalize on the tech boom of the early 2000s. However, the bank’s fortunes took a turn for the worse when the dot-com bubble burst, leading to a significant decline in the bank’s performance and reputation. In this blog post, we’ll explore the factors that led to the Silicon Valley Bank failure and what lessons can be learned from it.

SVB had to go through some big changes to stay viable, including being sold to sold to SVB Financial Group, a holding company that still owns and operates the bank today.

You might think that SVB learned something from that experience, that they would have diversity in the firms they lend to, their borrowers, and their depositors. Not a chance! They went right back to having mostly tech startups being their customers. When times got hard for the startups they needed cash. The bank had invested almost entirely in bonds. The rising interest rates depreciated the value of those bonds, plus it takes time to sell bonds. Not helpful in the short term.

Uninsured Deposits

While Silicon Valley Bank was messing up big-time, the tech-firms where all of those geniuses are, SVB’s depositors were all managing their money wisely, right? I don’t know where these guys got their PHDs, but they are worthless. Anyone who knows anything about finance know you don’t have more then $250,000 cash in a single bank long term. There are other financial instruments for that. (I am not an accountant therefore I have no idea what those instruments are. Roku had almost $500 million in SVB?! Even this poorly educated geek that has never taken a accounting or finance class knows better than this. You don’t put all of your eggs in one basket!