SVB_Collapse_Presentation_With_Meme_Updated.pptx

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1. The Rise and Fall of Silicon Valley Bank: What Happened?

2. What is Silicon Valley Bank? • Silicon Valley Bank (SVB) was founded in 1983 and focused on supporting tech startups. • In 2022, SVB was the 16th largest bank in the United States, with $209 billion in total assets. • SVB became the primary bank for over 50% of U.S. venture-backed startups.

3. The History of SVB • 1983: Founded by Bill Biggerstaff and Robert Medearis in Santa Clara, California. • 1990s: Benefited from the first internet boom. • 2000s: Expanded globally to India, China, Israel. • 2020: Thrived during the tech boom, reaching $209 billion in assets by 2022. • SVB’s stock price peaked at over $700 per share in 2021.

4. A Bank for Innovators • SVB specialized in loans and banking services for tech startups and venture capitalists. • Worked with tech giants like Pinterest, Shopify, and Roku. • During COVID-19, the tech sector surged, and SVB's assets grew from $71 billion in 2019 to $209 billion by 2022.

5. What Went Wrong? • Rising Interest Rates: Fed's rate hikes decreased the value of SVB's long-term bonds. • Concentration of Clients: SVB's clients were mostly cash-burning startups. • Liquidity Crisis: To cover withdrawals, SVB sold bonds at a loss, leading to a bank run.

6. The Final Blow • March 8, 2023: SVB sold $21 billion in securities at a $1.8 billion loss. • Panic spread among depositors, resulting in a $42 billion withdrawal in a single day. • March 10, 2023: SVB was shut down by regulators and the FDIC took over.

7. Key Reasons for Collapse 1. Interest Rate Hikes: Fed's aggressive rate hikes slashed the value of SVB's bond holdings. 2. Lack of Diversification: SVB was heavily reliant on tech startups. 3. Mismanagement of Risk: Failed to hedge against interest rate increases. 4. Uninsured Deposits: 90% of SVB’s deposits were uninsured, leading to panic.

8. The Aftermath • FDIC took over SVB’s assets to protect depositors. • SVB’s UK arm was sold to HSBC for £1 in an emergency deal. • Ripple effects in the startup ecosystem as SVB was a major liquidity source. • Concerns about the stability of other banks with large uninsured deposits.

9. Lessons Learned 1. Diversification is crucial for financial institutions and clients. 2. Effective risk management and hedging are essential, especially with rising rates. 3. Panic communication can make a bad situation worse. 4. Over-reliance on uninsured deposits is risky during financial uncertainty.

10. Conclusion • SVB’s collapse highlights the importance of risk management and diversification. • The bank’s downfall teaches valuable lessons for startups and banks alike. • Moving forward, the financial sector will likely implement stricter regulations for tech-focused banks.

11. Questions?