A year after imploding, Silicon Valley Bank tries to make a comeback

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SAN FRANCISCO — The ads loom over commuters and tourists, plastered with the colorful brand of what many here in the tech industry’s capital city thought was a company consigned to the dustbin of history.

A year after Silicon Valley Bank imploded in the third-largest bank failure in U.S. history, the start-up- and tech-focused bank wants you to know that it’s back. It’s under new management, and now owned by North Carolina-based First Citizens Bank, which bought its deposits and branches out of bankruptcy weeks after SVB crumbled in March 2023.

The bank lost scores of customers, many of whom frantically pulled their money out over a chaotic few days last year in a bank run that shocked the tech industry and triggered a government rescue. Hundreds of employees were laid off, while others left voluntarily, taking their customers to competing banks. Since then, the bankers that remain have been trying to rebuild trust and get out the message that they’re still around.

“The last year has been a lot about trying to correct what I think is a false narrative that SVB went away, that SVB left a void,” Marc Cadieux, SVB’s president, said Thursday at the Newcomer Banking Summit in San Francisco. “The truth is we never left.”

About 81 percent of customers from before the bank failure still have accounts at SVB, Cadieux said. Thousands who left have come back, he said. Relationships are still core to the way the bank runs, and it wants to keep focusing on catering to start-ups, even in their early stages, he added.

“We’re still doing all the same things that made us successful before,” he said.

Not everyone’s convinced.

“I don’t know anybody who has all of their money there,” said Antoine Nivard, co-founder and general partner at Blank Ventures, a venture capital fund investing in start-ups. “Whether that’s start-ups or venture funds, everybody got burned once. Nobody wants to get burned twice.”

Before the bank run, SVB had about $119 billion in customer deposits, according to the Federal Deposit Insurance Corp. At the end of 2023 that amount was just $38.5 billion, First Citizens said in its fourth-quarter earnings report. Some of that is due to the general downturn in Silicon Valley, where it’s become difficult for start-ups to raise money because of higher interest rates and bigger tech companies slowing down their spending on software. But after the failure of SVB, other banks jumped in to take up many of its former clients, whether they were start-ups, bigger tech companies, venture capital funds or individuals who work in the tech industry.

Cadieux admits the days of being the exclusive banker to thousands of tech executives and their companies is over. “Everyone has two banks now,” he said.

Before the crash, Silicon Valley Bank dominated the tech industry. The bank’s pleasant blue-and-white logo was omnipresent at tech conferences. It loaned money to both the venture capitalists investing in start-ups and the start-ups they were investing in. When a founder who might not have a real salary but was running a promising start-up needed a mortgage, they went to SVB. It even built up a business banking for Napa Valley wine producers, giving its tech clients access to California’s best wine and exclusive vineyard parties.

“It hearkened back to a different era of banking,” said Peter Hébert, co-founder and managing partner of venture firm Lux Capital and a former analyst at Lehman Brothers. “People would, in effect, look you in the eye and say you are worthy of credit. It was this old-school approach.”

Start-ups with no revenue or profit could get loans simply by having an investment from a trusted venture capitalist. “It was underwriting the underwriting. They would ask, ‘Do you trust this company?’ And if we said yes, that was good enough,” Hébert said. “That’s no longer how it’s done.”

Today, start-ups and venture capitalists shop around for the best bank, instead of automatically going to SVB, Nivard said. “I think it’s better for the industry, potentially, that you end up in four or five banks that are ultracompetitive,” he said. “I don’t think banking for venture [investing] is going away.”

SVB spent 40 years building up its business in Silicon Valley. It fell apart in a day. In 2020 and 2021, low interest rates and consumer demand for internet entertainment, work-from-home tools and new laptops led to a tech industry boom. Investors poured money into start-ups, and they in turn largely stashed it at SVB. The bank took those deposits and invested in longer-term assets that paid more interest.

But when the world emerged from pandemic lockdowns and interest rates increased, the tech industry entered a downturn, firing tens of thousands of workers and pulling back on new investments. Start-ups that were losing money pulled deposits from the bank, right as the higher interest rates hurt SVB’s investments.

On March 8, 2023, the bank said it was raising new cash by selling shares at a major loss. Concerns that had been brewing in financial circles about the bank’s investments exploded into the close-knit community of tech investors and founders. Blue-chip venture firms told their portfolio companies to pull out of SVB, and the news spread on group chats and on Twitter. Founders with companies who solely banked with SVB moved millions of dollars of company money into their own personal bank accounts. By the end of March 9, $42 billion had been pulled out of the bank.

“It was like the banking equivalent of the U.S. withdrawal from Afghanistan,” Hébert said. “It was absolute sheer terror.”

SVB collapsed the following morning, and the federal government took it over.

The bank run spurred deep soul-searching among the tech elite, who, despite the years of relationship-building and wine clubs, now realized they had eviscerated the bank they called their own. Politicians in Washington were skeptical about bailing out the start-ups who had lost their money in the bank failure, asking why taxpayers should rescue what many in the country saw as a group of rich and arrogant techies.

Hébert was among those lobbying in the days after the failure for a bailout, arguing that if the government didn’t step in to guarantee deposits, the concerns would spread and could trigger failures at other regional banks. The fact that the bank was located in the traditionally liberal Silicon Valley didn’t help things with Republican politicians, he said.

“Some of them specifically said, ‘Why should I care? It doesn’t matter to my constituents,’” Hébert said.

The crisis was made worse by the government taking three days before deciding whether it would guarantee deposits lost in the bank, said Laurence Tosi, managing partner and founder of venture capital firm WestCap, who served as chief financial officer of private equity giant Blackstone during the 2008 financial crisis.

“That period told everyone in business in the United States that your deposits aren’t safe,” Tosi said, referring to the weekend after SVB’s failure. Silvergate Bank and Signature Bank, two firms that had heavy exposure to cryptocurrency, failed soon after. Later, another California bank called First Republic went into bankruptcy as well. But the crisis didn’t spread widely into the rest of the economy.

Tech start-ups and venture capitalists who had never thought about banking have learned some valuable lessons in terms of spreading deposits among various banks and being able to move them quickly if need be, Nivard said. Companies have emerged to help other start-ups manage and distribute their money among different banks.

The days of Silicon Valley Bank being the tech industry’s “800-pound gorilla” are over, he said. And despite all the billboards and subway ads, some people aren’t going back to SVB.

“I pulled every dollar out in the first week of their comeback,” said Biju Ashokan, the CEO of Radius, a tech platform for real estate investors. He now banks elsewhere and doesn’t plan to return to SVB. “I don’t think there is a new start-up bank.”

Michael J. Coren contributed to this report.

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