By Collecty Research | Forensic Series: The Giant Client Trap
Reading time: 10 minutes
On Wednesday, March 8, 2023, Silicon Valley Bank (SVB) was the 16th largest bank in the United States, with $209 billion in assets and a client list that included nearly half of all U.S. venture-backed startups.
By Friday, March 10, it was dead.
In 48 hours, depositors withdrew $42 billion — roughly 25% of the bank's total deposits. The bank run happened not in queues outside branches, but via mobile apps, wire transfers, and coordinated panic in Slack channels and Twitter threads.
SVB's collapse was the second-largest bank failure in U.S. history (after Washington Mutual in 2008) and the fastest. It triggered contagion that killed two more banks and required a $173 billion emergency Federal Reserve lending program to prevent wider panic.
This is the story of how a bank can die at the speed of the internet — and what it means for B2B suppliers whose clients bank with institutions that might be next.
How Did SVB Get Here?
The Business Model
Silicon Valley Bank was founded in 1983 specifically to serve tech startups and venture capital firms. Its niche:
- Startups deposited their VC funding rounds (often tens of millions)
- VCs deposited their fund capital
- SVB provided loans, lines of credit, and banking services tailored to high-growth companies
By 2023, SVB banked:
- Nearly 50% of all U.S. venture-backed tech startups
- 44% of all U.S. venture-backed healthcare companies
- Major VC firms: Sequoia, Andreessen Horowitz, Kleiner Perkins
The concentration was extreme. Many startups banked exclusively with SVB.
The Interest Rate Problem
Between 2020 and 2022, venture capital flooded into startups. Companies raised huge rounds and parked the cash at SVB. The bank's deposits swelled from $61 billion (2019) to $189 billion (2022).
Banks make money by taking deposits and lending or investing them. SVB invested heavily in long-term U.S. Treasury bonds and mortgage-backed securities — safe assets, but with a problem:
When interest rates rise, the market value of existing bonds falls.
Between March 2022 and March 2023, the Federal Reserve raised interest rates from near-zero to over 5% — the fastest rate-hiking cycle in decades. SVB's bond portfolio, purchased when rates were low, was now worth significantly less than what SVB paid for it.
On paper, SVB had an unrealized loss of approximately $15 billion in its bond portfolio.
As long as SVB held the bonds to maturity, the losses were just paper losses. But if the bank needed to sell the bonds to cover withdrawals, the losses would become real.
The Venture Capital Downturn
Simultaneously, the VC market froze:
- Startup valuations fell
- Funding rounds dried up
- Companies started burning through their cash reserves
- Deposits at SVB began to decline
By early 2023, SVB was facing deposit outflows. Startups were withdrawing money to cover operating expenses, but new deposits from fundraising rounds weren't coming in to replace them.
The 48-Hour Collapse
Wednesday, March 8, 2023 — 2:00 PM Pacific
SVB announced it had sold $21 billion in securities at a $1.8 billion loss to shore up its balance sheet. The bank also announced plans to raise $2.25 billion in new capital.
The announcement was intended to reassure investors. It had the opposite effect.
Wednesday, March 8 — 3:00 PM
Venture capitalists began texting and calling their portfolio companies:
"Pull your money out of SVB. Now."
Group chats, Slack channels, and private messages exploded with warnings. The message spread through the tech ecosystem like wildfire.
Thursday, March 9 — 9:00 AM
Startups began wiring funds out of SVB en masse. By the end of Thursday, depositors had requested to withdraw $42 billion — approximately 25% of the bank's total deposits.
This wasn't a slow, building panic. It was instant, coordinated, and executed digitally. No lines outside branches. No checks or cash. Just wire transfers and ACH payments moving billions in minutes.
Thursday, March 9 — Evening
Prominent VCs publicly advised companies to diversify their banking relationships. Some tweets and Slack messages specifically named SVB as a risk.
The panic was now fully public.
Friday, March 10 — 10:00 AM
The California Department of Financial Protection and Innovation closed Silicon Valley Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
SVB was dead. The 16th largest bank in the U.S. had collapsed in 48 hours.
The Unique Nature of This Bank Run
Speed
Historically, bank runs took days or weeks. Depositors had to physically go to branches during business hours. SVB's collapse happened in 48 hours because:
- Digital banking enabled instant withdrawals
- Mobile apps allowed transfers at any time
- Wire transfers moved money in minutes, not days
In the age of instant communication and digital banking, a bank run moves at the speed of Twitter.
Coordination
Venture capitalists coordinated the withdrawal via:
- Private Slack channels
- Group texts
- Twitter direct messages
- Portfolio company email lists
What might have been individual, scattered withdrawals became a synchronized mass exodus.
Concentration
SVB's customer base was highly concentrated:
- 97% of deposits were above the $250,000 FDIC insurance limit
- Most depositors had millions or tens of millions at risk
- Many companies banked exclusively with SVB
When the panic hit, there was no diversity to cushion the blow. Everyone moved at once.
The Contagion
Signature Bank — March 12, 2023
Two days after SVB collapsed, Signature Bank (focused on crypto and real estate) was also seized by regulators after suffering a bank run. Deposits fell from $88 billion to $73 billion in days.
First Republic Bank — May 1, 2023
First Republic, a bank serving wealthy individuals and businesses, faced deposit outflows as customers feared it would be next. Despite a $30 billion emergency deposit from major banks, First Republic failed and was acquired by JPMorgan Chase.
Federal Response
On March 12, 2023, the Federal Reserve, Treasury, and FDIC announced:
- All SVB and Signature Bank depositors would be made whole — even those above the $250K FDIC limit
- A new Bank Term Funding Program offering up to $173 billion in emergency loans to banks facing deposit outflows
The goal: stop the panic before it spread to the entire banking system.
The B2B Supplier Impact
Thousands of startups had their operating cash locked in SVB when it collapsed. Even though the government eventually guaranteed deposits, there were days of uncertainty. During that window:
Payroll Couldn't Be Met:
Companies couldn't access cash to pay employees. Some delayed payroll by days.
Vendor Payments Stopped:
Suppliers waiting for payment found invoices frozen. Companies literally couldn't wire money because their bank accounts were inaccessible.
Credit Lines Vanished:
SVB credit lines were instantly unusable. Companies relying on lines of credit to cover short-term cash needs had no access.
Operational Paralysis:
For companies banking exclusively with SVB, basic operations — paying rent, paying suppliers, processing refunds — became impossible.
For B2B suppliers, the lesson was brutal: Your client might want to pay you. They might have the money. But if their bank collapses, your invoice becomes operationally impossible to pay.
What Suppliers Should Watch For
If your client banks with a single institution — especially a niche or industry-specific bank — they're vulnerable. Action: For major clients, ask which banks they use. Encourage (or require) banking diversity as part of your credit terms.
The Regulatory Aftermath
FDIC Review:
Regulators acknowledged that SVB's collapse was partly due to inadequate supervision and risk management.
Basel III Implementation:
Larger banks now face stricter capital and liquidity requirements, but mid-sized banks (like SVB) have lighter rules.
Banking Consolidation:
SVB's failure accelerated consolidation. Smaller banks are merging or being acquired by larger, more stable institutions.
Startup Banking Diversity:
Post-SVB, VCs now advise portfolio companies to bank with multiple institutions and keep deposits below FDIC limits per bank.
What Comes Next
SVB's assets were sold to First Citizens Bank in March 2024. First Citizens acquired $72 billion in loans and $56 billion in deposits, gaining an instant tech banking franchise.
The FDIC estimates the SVB failure will cost the Deposit Insurance Fund approximately $20 billion.
For the startup ecosystem, the scars remain:
- Companies now split deposits across multiple banks
- VC due diligence includes banking relationships
- Treasury management became a C-suite priority
For suppliers, the lesson is permanent: Banking risk is supplier risk. If your client's bank fails, your invoice becomes collateral damage.
Worried about a client's payment capacity? Collecty specializes in B2B debt recovery from financially distressed companies. 80%+ success rate. 160+ countries. No win, no fee. Free case assessment →
Sources
- FDIC: "Silicon Valley Bank, Santa Clara, California (Failed)" (March 2023)
- Federal Reserve: Bank Term Funding Program Announcement (March 12, 2023)
- Wall Street Journal: "How Silicon Valley Bank Became the Biggest Bank Failure Since 2008" (March 2023)
- Financial Times: "The 48 hours that brought down Silicon Valley Bank" (March 2023)
- Bloomberg: "SVB's $42 Billion Bank Run in Two Days" (March 2023)
- U.S. Treasury: Joint Statement on SVB (March 12, 2023)
- FDIC: "2023 Banking Crisis: Lessons Learned" (September 2023)
- S&P Global: SVB Financial Group Credit Reports (2022-2023)
Sarah Lindberg
International Operations Lead
Sarah coordinates our global partner network across 160+ countries, ensuring seamless cross-border debt recovery.
