What Is The Silicon Valley Bank Collapse? The Viral Story Explained

A political blame game has begun in the financial world after the collapse of the American Silicon Valley Bank (SVB) last week (March 9th). The startup tech sector was already fumbling with bad news since late 2022 and early 2023 with mass layoffs and, more recently, the unsuccessful attempt to raise capital and an exodus of funds from the startups that fueled SVP's rise quickly became the subject of memes online.

So how did the Silicon Valley Bank collapse become the second-largest bank failure in U.S. history? Let's find out.

What Is The Silicon Valley Bank?

Silicon Valley Bank is a state-chartered commercial bank founded in 1983 and specializing in the tech startup industry. Before collapsing on March 2023, SVP was the 16th largest U.S. bank, with assets totaling $209 billion at the end of 2022.

Why Is The Silicon Valley Bank Collapse So Important?

On Thursday, March 9th, 2023, reports of instability at Silicon Valley Bank began to spread online, causing a bank run from startups who had their cash in the bank. Mind you, SVP's own website affirms that it banks nearly half of all U.S. venture-backed startups and 44% of the country's technology and healthcare companies.

Why Did SVB Collapse?

Even though regulations offering greater protection to consumers have been around since the Great Depression, there was still a limit to how much the Federal Deposit Insurance Corporation (FDIC) insurance could protect its customers. So what happens when half of all U.S. venture-backed technology and healthcare companies try to withdraw more than $42 billion from the firm in one day? Implosion!

Another major factor that explains SVP's collapse was the lack of diversification in the bank's investments. According to a Bloomberg article, Silicon Valley Bank used a lot of its money to buy low-yield bonds and other assets that make money long-term, which only work out as long as interest rates stay low. Unfortunately for the bank, the interest rates in recent years reached almost 0 percent, leading people online to be more convinced that the bank was destined to fail due to this strategy reducing the profit of investments.

Still following the explanation, or is it still complicated? Let's try this Gru's plan meme recap of SVBs Collapse, uploaded to Twitter by user @JosephPolitano on March 9th (shown below).

The bank's extremely fast collapse has burst through tech industry companies and left startup founders rushing to find emergency loans to save their companies.

How Did The Internet React To SVB Failure?

Just like November 2022's FTX Crypto Crash, the SVB Failure sparked widespread discourse about the world's current economic state and memes poking fun at the event across social media. For instance, Twitter user @ParikPatelCFA posted a "Best I can do is" meme as a response to the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 (shown below).

One of the best explanations for SVB failure was posted by TikTok user @morningbrew on March 11th, in which he made a skit detailing the event under the caption "Wtf happened with Silicon Valley Bank," receiving over 158,000 likes, 15,000 shares and 1,000 comments in two days:

For the full details on the Silicon Valley Bank collapse, be sure to check out our entry on the meme here for even more information.