03/13/2023

Silicon Valley Will Still Need A Bank

Its replacement cannot overly rely on a single class of depositor

The basic question is: Is it sensible for a single bank to dominate an industry?

Silicon Valley Bank, which collapsed on March 10 after suffering a bank run, was—as its name suggests—the go-to bank for tech startups. Its website boasted it banked 44 percent of venture-backed firms that had gone public, which was in part because it was also the bank for more than 2,500 venture-capital firms. It understood founders' needs; it made introductions. "You couldn't go to a party in the Bay Area that wasn't sponsored by Silicon Valley Bank," said Danish Nagda, the founder of a health startup, Rezilient, on a Twitter Space the day after the collapse.

Right now, you might be inclined to say that this concentration was a bad thing. The short version of why SVB failed is that it relied too much on a single class of depositor, namely startups.

Please select this link to read the complete article from WIRED.