The archive · Money & Fintech · Strategic decision · 1983–2023
SVB's startup-banking bet dies in a 2023 run; First Citizens retires the brand
SVB built venture debt by banking startups nobody else would touch, then lost its franchise to a two-day 2023 run; the name comes off in October 2026
SVB (Silicon Valley Bank)
What the business is
SVB was the startup economy's bank: checking, credit and the venture debt it invented for US venture-backed technology and life-science companies, banking close to half of them at its peak
How it started
The idea came out of a poker-game conversation at Pajaro Dunes in the early 1980s between Wells Fargo executive Bill Biggerstaff and Stanford professor Robert Medearis, who thought the companies being funded up and down Sand Hill Road needed a bank that understood them. SVB opened its first office in San Jose on October 17, 1983, with Roger Smith as founding CEO. The first decade nearly ended it: by the early 1990s roughly half the loan book was commercial real estate, and when the California market turned SVB posted a loss in 1992. It pulled real estate down to under 10% of loans within three years and went all in on the innovation economy instead.
What happened
That pivot set up the next 25 years. SVB built an underwriting model for companies with no profits, often no revenue, and an asset base consisting almost entirely of a term sheet and a team; it invented venture debt as a real product category, lent early to Cisco and Bay Networks, and expanded to Israel in 2008, the UK and a China joint venture in 2012, then Europe and Canada. By the end it banked close to half of all US venture-backed technology and life-science companies and handled 55% of venture-backed tech and healthcare IPOs in 2021 and 44% in 2022. Total assets went from about $71 billion in 2019 to more than $211 billion by 2021. Deposits arrived faster than anyone could deploy them into loans, so SVB put an enormous share into long-duration securities at the exact bottom of the rate cycle — then the Fed hiked nine times in a year. The Fed's own post-mortem called it a textbook case of mismanagement: no chief risk officer for roughly eight months, interest-rate hedges that had come off, 31 open supervisory findings at the end of 2022, risk positioned to protect against rates falling rather than rising, and deposits overwhelmingly uninsured and drawn from one interconnected industry. On March 8, 2023, SVB sold about $21 billion of securities at a roughly $1.8 billion after-tax loss and announced it would raise $2 billion. On March 9 clients attempted to pull $42 billion in a single day. On March 10 the California DFPI closed it and appointed the FDIC as receiver — the second-largest bank failure in US history at the time.
How it ended up
On Sunday March 12, 2023, the Treasury Secretary, the Fed Board and the FDIC Board invoked the statutory systemic-risk exception and guaranteed every depositor, insured and uninsured. Protecting uninsured depositors at SVB and Signature cost the Deposit Insurance Fund an estimated $16.3 billion, repaid through a special assessment on the 110 banks holding more than $5 billion in uninsured deposits; shareholders and certain bondholders were wiped out. SaaStr AI's roughly $10 million of uninsured operating cash came back only because of that policy call. First Citizens bought the franchise and roughly doubled into a $236 billion bank, and in October 2026 the SVB brand retires: Silicon Valley Bank Technology and Healthcare Banking becomes First Citizens Innovation Banking, SVB Global Fund Banking becomes First Citizens Fund Banking, and SVB Go becomes Go by First Citizens Bank. SVB Financial Trust, the old holding company's successor, sued First Citizens in March 2025 over the trademarks, chevron logo and svb.com, with a jury trial set for February 2027.
Background
Silicon Valley Bank was founded in 1983 on the bet that venture-backed companies with no profits, often no revenue and an asset base of a term sheet and a team were bankable, and that one bank could own the business nobody else wanted. It opened its first office in San Jose on October 17, 1983, nearly died when early-1990s real-estate lending soured, and then pivoted hard to the innovation economy, inventing venture debt as a product category.
The strategy worked for decades: SVB banked close to half of all US venture-backed technology and life-science companies and handled 55% of their IPOs in 2021. Deposits then tripled from about $71 billion in 2019 to over $211 billion by 2021, faster than they could be lent out, so SVB bought enormous amounts of long-duration securities at the bottom of the rate cycle. When the Fed hiked nine times in a year, its post-mortem found no chief risk officer for eight months, hedges that had come off, 31 open supervisory findings, and a portfolio positioned for rates falling, not rising.
On March 8, 2023, SVB sold about $21 billion of securities at a $1.8 billion after-tax loss and announced a $2 billion raise. Clients tried to pull $42 billion the next day, and on March 10 regulators closed the bank — the second-largest US failure at the time. A March 12 systemic-risk exception guaranteed all depositors, costing the Deposit Insurance Fund an estimated $16.3 billion, and First Citizens bought the franchise. SaaStr's founder, who had $10 million of uninsured cash at SVB, says the weekend is why startups now run multiple accounts; the SVB name comes off in October 2026.
What has to be true
- The underwriting edge itself created the fatal concentration: banking close to half of US venture-backed tech and life-science companies put one industry's funding cycle under the whole deposit base
- Deposits grew faster than loans, so the balance sheet was stuffed with long-duration securities bought at the bottom of the rate cycle, and the hedges that had existed were gone when rates rose
- Risk management was hollowed out for short-run profit — no chief risk officer for about eight months and unreliable rate-risk simulations left the bank positioned for rates falling, not rising
- Deposits were overwhelmingly uninsured and clients were all connected through group chats and VC portfolio emails, so a $1.8 billion loss announcement became a $42 billion one-day withdrawal request
- The resolution — a depositor guarantee funded by a special assessment on other banks — saved startup payrolls but ended the era of one institution holding half the ecosystem's cash
What can be applied
Dominating one customer type made SVB irreplaceable, but the same concentration — one industry's uninsured deposits plus an unhedged duration bet — turned its own customers into the run channel
Aftermath
Inside First Citizens the franchise is a $236 billion bank — $151.0 billion in loans, $173.4 billion in deposits in Q2 2026 — still paying down the $35 billion purchase note. The SVB name retires in October 2026 into First Citizens' Innovation Banking, Fund Banking and Go brands; SVB Financial Trust's March 2025 trademark suit runs to a February 2027 jury trial. Startup treasuries fragmented: JPMorgan added hundreds of innovation-economy bankers, Mercury and Brex took new company formation, and venture-backed companies now keep multiple bank accounts with sweep products.
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