Ron Conway, Founder, SV Angel: Silicon Valley Bank Crisis

**SPEAKER_1** (0:00)
So, Carolynn, today we are back with Ron Conway. Today we're gonna talk about the Silicon Valley Bank collapse, which happened in March of 2023 Everyone in Silicon Valley, it almost felt like the world stopped that weekend.
Everyone was involved somehow because everyone banked with them. But what most people don't realize is what a critical role Ron Conway played behind the scenes in saving this disaster from happening. It was basically resolved over a weekend, and Ron spent that whole weekend working to solve this problem. I'm really excited, Ron, to talk to you today about this.

**SPEAKER_2** (0:45)
Yes. But Jessica, you are putting it mildly when you say it was a disaster.
But I can't think of another word that escalates the word disaster. Catastrophe, maybe.

**SPEAKER_1** (1:00)
Yeah, catastrophic.

**SPEAKER_2** (1:01)
Yeah. For the tech industry and all the small businesses throughout Silicon Valley, who also banked at Silicon Valley, this was absolutely a catastrophe. And what's so interesting is Silicon Valley Bank was like synonymous with Silicon Valley.
SV Angel also, just like Y Combinator, just naturally recommended to all of our companies that your bank is Silicon Valley Bank. Silicon Valley Bank is where you want to deposit the money you got from your financing. And then in addition, Silicon Valley Bank can provide you with loans, lines of credit and all of their services.

**SPEAKER_1** (1:54)
Here are the founders who get around to funding and who all of a sudden get a wire transfer for $5 million more. They have to have a place for it to go, and then that's how they run their business and pay their employees and everything. It's a big shift.

**SPEAKER_3** (2:11)
You know what's really important too, and this becomes important later in your story, but it should not be lost on anyone that this was a huge, huge, huge thing for Silicon Valley and for the tech industry, but there were a ton of non-technical customers of SVB.
It is a local bank, local to the Valley. It wasn't just for technology companies. It was for everybody in the Valley.

**SPEAKER_2** (2:32)
It was part of the ecosystem.

**SPEAKER_3** (2:33)
Yes, exactly. Mom and Pop shops also used it for their money. So that's, I think, a very important point.

**SPEAKER_1** (2:40)
But Ron, you were around when it began, right?

**SPEAKER_2** (2:44)
I sure was.
Silicon Valley Bank started in the 1980s.
And think about it, the Internet boom didn't really even start until the late 80s and 90s. So Silicon Valley Bank started when the heart of Silicon Valley was the semiconductor companies and the computer companies. So Silicon Valley Bank is really, really part of the fabric of Silicon Valley. Literally 50% of the tech companies, small businesses and the venture capitalists, all banked at Silicon Valley Bank. It was part of the culture of Silicon Valley. By 2022, they had assets of 200 billion dollars.

**SPEAKER_3** (3:44)
Whoa.

**SPEAKER_2** (3:45)
The 16th largest bank by asset size, which is how you measure banks, in the United States.

**SPEAKER_3** (3:54)
That's amazing. For a regional bank, that's amazing.

**SPEAKER_2** (3:56)
And we were all proud of that. The Silicon Valley ecosystem could support the 16th biggest bank in America.

**SPEAKER_1** (4:07)
So for like 40 years, Silicon Valley Bank is growing and thriving. What happened that led to the collapse?

**SPEAKER_2** (4:17)
So Silicon Valley Bank, like other banks, they invested in treasuries and mortgage-backed securities in the 2021-22 timeframe when interest rates were really, really low. But then in 22-23, as you recall, the Federal Reserve came in and started raising interest rates.
This was a problem for Silicon Valley Bank because then it lowered the value of their assets. So they started to accumulate pretty large, unrealized losses on securities, and they did not hedge against the interest rate increase that was happening in 23

**SPEAKER_3** (5:19)
So as a public company, they had to disclose all this risk, but they weren't hedging against it, even though they were disclosing it.

**SPEAKER_2** (5:27)
They weren't hedging near enough.

**SPEAKER_1** (5:30)
Right, okay.

**SPEAKER_2** (5:31)
Is what is so, so unfortunate. Once they realized that they weren't hedging enough, they had to start selling assets at a loss to raise cash for depositors in their day-to-day business affairs.

**SPEAKER_1** (5:51)
So I think that on March 8th, they put out a press release saying that they sold securities at a big loss and were raising money to strengthen their balance sheet.

**SPEAKER_2** (6:01)
Yeah, they disclosed that, hey, history has not been good to us.
We invested a lot in low interest assets. Then interest rates went up. We didn't hedge against interest rates going up, which created losses on our balance sheet. But we still had to create cash for our depositors. So on March 8th, they disclosed in that public filing that they had losses of $1.8 billion from bond sales, you know, that they had to raise in order to run the bank.