The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank Friday in the largest bank failure since the 2008 financial crisis.
Before its sudden collapse, Silicon Valley Bank was the 16th largest in the country, with 17 branches in California and Massachusetts. The bank is a backbone of the tech startup economy, serving as a lender and holding the accounts for venture capital firms and startups.
As worries about SVB's financial health spread on Thursday, the bank urged clients to “stay calm." But many VC investors advised their portfolio companies to get their money out while they still could, sparking a rush of panicked withdrawals that echoed the devastating bank runs of the Great Depression.
The scene on Friday was grim as SVB clients tried to figure out what the bank's abrupt closure meant for them. Some people turned up at Silicon Valley Bank branches, seeking answers or hoping to withdraw money. They did not receive
The doors at the bank's Santa Clara, Calif headquarters were closed on Friday, and staffers occasionally popped out to give the bad news to the people assembled outside. According to a video posted on Twitter, a line of people at another SVB branch pushed out onto the street, even as an "atmospheric river" drenched the area with rain and kept the region under a flood watch.
Visitors to this Silicon Valley Bank office were greeted with an announcement, hastily taped to the door, announcing the closure. The notice explained that the amount of deposits above the $250,000 FDIC insurance limit is yet to be determined, though the bank had about $209 billion in total assets and around $175.4 billion in total deposits at the end of last year.
The bank's downfall happened astonishingly fast. On Wednesday, SVB said it would seek to raise more than $2 billion in capital to cover losses on its balance sheet. Investors took that as a bad sign and on Thursday, shares of Silicon Valley Banks' publicly-traded parent company, SVB Financial, plunged 60%. On Friday, the stock fell 60% in premarket trading and was halted.
Silicon Valley Bank CEO Greg Becker has been running the firm since 2011. During an emergency zoom call with investors on Thursday, he assured listeners that the bank had plenty of liquidity and asked clients not to panic. “We have been supporting you and your startups for 30 years. We now ask you not to panic,” Becker said on the call, according to tech news site The Information.
One person with special access to Silicon Valley Bank on Friday was the pizza delivery guy, supplying pie-shaped sustenance to the building's cloistered occupants.
As SVB entered its new phase under FDIC receivership, worries of contagion began to spread on Friday. Share prices of other regional banks fell by more than 20% Friday, including First Republic, Western Alliance Bancorp, and PacWest Bancorp. U.S. Treasury Secretary Janet Yellen has been keeping an eye on SVB's fallout, saying Friday that there are a few banks she's monitoring. “When banks experience financial losses, it is and it should be a matter of concern," she said.
Now that SVB is locked up, some startups whose cash is tied up in the bank, are scrambling to figure out how to make payroll and other expenses. “Our heads are spinning over here—not entirely sure what happens next," one startup founder told Fortune in a private message after the bank failed.
