The rise and fall of Silicon Valley Bank | March 17, 2023 | Palo Alto Weekly | Palo Alto Online |

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News - March 17, 2023

The rise and fall of Silicon Valley Bank

Founded on the idea of providing credit and banking services to Silicon Valley's growing tech startups during a time when the sector was largely overlooked by traditional banks, Silicon Valley Bank became a cornerstone in the startup world. Eventually, the bank would come to do business with nearly half of all U.S. tech startups backed by venture capitalists.

Here is look at the bank's lifespan, from its founding to its demise.


1982: A big gamble

Atherton entrepreneurs Bill Biggerstaff and Bob Madearis share their idea about starting a bank aimed at serving tech startups during a poker game with a group of friends made up of developers, engineers and techies, who become part of the bank's original 100 investors known at the "who's who" of Silicon Valley.

"When we got the Findley Reports, and we started to finalize it and we sat around, had the name, and so on, I brought up the question. I said, 'You know ... Bill and I are thinking about starting a bank up' ... and interesting enough, everybody in the poker group invested." —Bob Madearis, co-founder (oral history, Computer History Museum 2014).

1983: Silicon Valley Bank opens its doors

Biggerstaff and Madearis bring on Palo Alto resident Roger Smith, who had previously headed a high-tech lending unit at Wells Fargo, as founding CEO, and open the bank's first office on North First Street in San Jose.

"One of the more unusual features (the bank) offers is a meeting room for executives with companies too small to have their own board room. It's a service that is unlikely to be provided by a local branch of a major bank. 'We have a number of companies that have board meeting in our offices,' said Roger Smith, president of Silicon Valley Bank." — San Francisco Examiner, May 6, 1984

1985: Expansion into Palo Alto

"So much of the technology back then was Palo Alto central, and so we opened a little office at Palo Alto Square, and that was very helpful to us. So that was part of our expansion. And so then, we kept growing." — Roger Smith, founding CEO (oral history, Computer History Museum, 2014)

1988: Bank goes public, raises millions of dollars in capital

In 1987, the company begins trading stock on the NASDAQ. A year later, it completes its IPO and raises $6 million in equity.

1989: Sand Hill Road office opens in Menlo Park, cementing SVB's presence in the venture capital community

With the opening of the Sand Hill Road office, SVB starts providing early venture capital to clients that would become some of the most successful companies in the world, including Cisco Systems and Bay Networks and other major players barely out of the womb.

"Bill Biggerstaff ... had a yellow pad every day, and he had all the clients he was going to call. And he met with the founders of Cisco in their kitchen. And so we were able to get that account and bank Cisco." — Roger Smith, founding CEO (oral history, Computer History Museum, 2014)

1990: Bi-coastal presence established

SVB opens an office near Boston to serve the Massachusetts Route 128 tech corridor. By 1991, it reports about $175 million in assets generated by more than 150 high-tech customers.

"The bank can't put out the multi-million-dollar loans, but there is no scarcity of small high-tech firms that it can approach. ... The bank's customers range from startups with no sales to companies that have annual sales to several hundred million dollars." — Allyn Woodward, executive president and manager of loan productions office in Wellesley. (Boston Globe, March 29, 1992)

1991: 21 consecutive quarters of profitability

During the 1980s, the bank grows with the local high-tech economy, achieving 21 consecutive quarters of profitability. It goes from a loss of $39,000 in 1985 to a profit of $12.3 million in 1991.

Growth and expansion

1992: Bank hit by the real estate bubble burst

Under Smith's leadership, the bank diversified into the high-risk real estate loan business, which amounted to 50% of its portfolio by the early 1990s. A slump in the California real estate market results in a $2.2 million loss for the bank.

"Well, I think one of the things that we did is we got bigger so we could make bigger loans. That was very helpful to us on the technology side but bit us in the butt on the real estate side. And we probably — if we would have stayed within 45 minutes of downtown Palo Alto, we would have been in better shape." — Roger Smith, founding CEO (oral history, Computer History Museum, 2014)

1993: Smith steps down as CEO

John Dean is named president and CEO. Smith serves as vice chairman of the bank before leaving to launch the Smith Venture Group the following year.

1994: Services expand to wine entrepreneurs

SVB opens a wine division to build its brand and expand its reach to Silicon Valley entrepreneurs. By 2015, the division accounts for 6% of the bank's loan portfolio, and SVB is one of the largest wine lenders in the country with more than 400 clients.*

2001: The dot-com bubble

After seeing its stock prices soar in the 1990s during the dot-com boom, the bank's stocks fall more than 50% when the bubble bursts.

2004: International expansion

SVB expands its international subsidiaries in Bangalore, India, and London and a joint venture in China. Over the next decade, it opens more offices in Europe and Canada.

2015: A dominant position among all startups

By the bank's count, SVB serves 65% of all existing startups and many of the most prominent venture capital firms.**

2022: Assets surpass $200 billion

With $209 billion in assets and $175 billion in deposits, SVB becomes the country's 16th largest bank.*** The bank's website claims that 44% of U.S. venture-backed technology and healthcare IPOs bank with SVB.

The collapse

2020-2022: Pandemic-era boom — and bust

SVB's deposits triple in size during the pandemic tech boom.**** The bank invests a large share of these funds into U.S. government bonds. During the post-pandemic turn down, customers start to withdraw their funds to stay afloat.

March 8: A $1.8 billion loss

Deposits come in lower than forecast in February, and SVB is forced to sell its bonds, which dropped in value over the past year due to a series of interest hikes at the Federal Reserve. The bank announces a $1.8 billion loss on the sale.

"We have sold substantially all of our Available for Sale (AFS) securities portfolio with the intention of reinvesting the proceeds, and commenced an underwritten public offering, seeking to raise approximately $1.75 billion." — Investor letter, Silicon Valley Bank

March 9: Shares drop

SVB shares fall 60% after investors learn about the bank's financial losses and begin to withdraw their funds.

March 10: Bank collapses

SVB cannot generate enough cash to meet the needs of its customers. Federal regulators take over the bank. Silicon Valley Bank's collapse becomes the largest since the 2008 financial crisis.

Sources: Silicon Valley Bank; *The Street, Aug. 11, 2015; ** The New York Times, April 1, 2015;

*** The California Department of Financial Protection and Innovation; **** ABC News, March 14.


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