Reflections on the 48 Hour Meltdown of SVB

A business school case study in the making.

This past Thursday morning, SVB‘s balance sheet strength was not top of mind. When I got wind of what was going on, things were moving so fast, shocking me and the others. Calls, texts and slack messages came in fast and furiously.

The hours since (including over the weekend) have been filled with my helping and counseling start-ups impacted and frightened by the events. On Friday evening, I sat down to have a much-needed glass of red wine and started to sort through my thoughts, which I’m sharing here:


1. Start-ups are in the operating business and not in the treasury business. That means taking risks in the areas that are core to the business value proposition and not in ancillary areas. The cash we have in the bank is our insurance policy for future expenditures. Clearly most of us forgot the importance of diversifying our risk. Especially for risks that are not core to our long-term business success.


2. Building wealth takes different skills from those necessary to keep wealth. A lesson that I keep remembering which I first read in one of my favorite pieces of financial writing by Morgan Housel. Risk taking is central to making money. Risk management and avoiding screw-ups is the key to staying wealthy. SVB forgot this lesson.


3. Our strengths are also our weaknesses. SVB was a household name in the start-up community. It was considered the bank of choice for every start-up, and likely touched nearly 50% of the dollars in the venture ecosystem. Their brand and reputation led to huge word of mouth benefits when things were going really well from mid-2020 through the early 2022. And, they had customer concentration risk. Within the VC community. On Thursday March 9th / Friday March 10th, the risk related to their brand and customer concentration took hold. People who knew, talked, and influenced each other fed a ‘run on the bank.’


4. What goes up, generally comes down.  As finance leaders, our responsibility to focus on risk and risk mitigation increases when everything seems to be going really well. That is when we need to ask questions such as: ‘What if things change? How exposed is the business?’ and ‘What could go wrong?’

Most trends do not defy gravity forever. Regression to the mean is the usual phenomenon. SVB’s deposit base grew from ~$50bn in late 2019 to almost $200bn in March 2022. It had taken the bank almost 30 years to accumulate their first $50bn in deposits. A sharp, upward spike in deposit became a spring-loaded coil waiting to be released. Rising interest rates starting in 2022 have had first, second and third order impacts on SVB fueling the rapid demise.

5. Interest rate changes matter. In the last 12 months, we’ve seen the 40-year trend of declining rates reverse. The rate of change (slope) of that reversal has been steep.

Initially rate increases impacted the valuation of traded securities. We saw that in 2022 causing sharp declines in the stock and bond markets, particularly for high growth technology stocks. This led to a drop in new fundraising and thus fewer new deposits with SVB.

Second, as treasury yields rose, start-up leaders and boards demanded higher yields on their deposits at SVB (and other financial institutions.)  Suddenly bank profitability collapsed — the cost of liabilities exceeded the earnings on loans and other assets.

Third, net deposits began to drop. Even though start-up burn was cut, that drop was not enough to offset the reduction in new funds being raised.

Finally savvy investors figured out the potential for sizable mark-to-market losses on securities supposedly held to maturity by banks. Securities with yield well below current safer treasuries which might have to be sold to buttress capital ratios.


6. Management execution is critical during challenging times. My outsider’s perspective is that the senior leadership team at SVB did a poor job in communication and execution. There might even be cause for a lawsuit here. It appears that SVB CEO Greg Becker sold almost $4mm in securities through a 10B5-1 trading plan on February 27, 2023 (while the company was likely exploring its capital raise.) Regardless, it is a reminder that senior leadership (especially CEOs and CFO, as well as Chief Risk Officers in the case of financial institutions) impact the lives of thousands of other people — employees, shareholders, customers, vendors and other counterparties.


I have my fingers crossed that the regulators find a quick fix alongside an existing bank who steps in to “buy” SVB. So that most of the deposits held at SVB are released quickly. To avoid the stress and chaos missed payrolls, substantially delayed vendor payments, furloughs, and layoffs.

Aditya Dehejia

Adi’s experiences as a CFO and HR leader in start-up companies inspired him to start the CxO Leadership Accelerator. He saw firsthand the challenges in building a satisfying career, the importance of leaders in developing people, and the difficulty in building broad business acumen while excelling in your functional role. Prior to his operating career in start-ups, Adi held roles in a growth capital investment firm and in the corporate development and strategy department at a Fortune 500 company. Adi is an active volunteer mentor in the FirstRound Capital and TechStars networks as well as within his University alumni communities. Adi was born in India and immigrated to the US at age ten. He attended Princeton University (graduated with a degree in Politics) and the Stanford Graduate School of Business. He lives in the suburbs of New York City and has two adult sons and two lovable, crazy dogs.

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