The banking and venture capital industry was thrown into disarray on Friday morning with the collapse of Silicon Valley Bank (SVB). The Federal Deposit Insurance Corporation (FDIC) took control of the bank's assets on Friday due to a capital crisis that had been building up since Thursday. This failure has sparked fears that other banks could be next, as panic sweeps through the start-up industry.
SVB Financial Group scrambled on Thursday to reassure its venture capital clients that their money was safe after a capital raise led to its downfall. However, due to the magnitude of the crisis, investors at some venture capital firms urged portfolio companies to move their money out of the bank as soon as possible. Silicon Valley Bank collapsed Friday morning after a stunning 48 hours in which a bank run and a capital crisis led to the second-largest FDIC-insured bank failure of 2020.
The stock of SVB’s parent fell another 66% in pre-trading hours on Friday, as investors quickly realized that the company’s efforts to raise capital had failed. This comes as the tech and tech-adjacent world is already reeling from banking-related carnage, and investors fear for the future of SVB. As a result, shares of SVB Financial Group were halted on Friday after tumbling 66% in premarket trading.