Silicon Valley Bank

Silicon Valley Bank (SVB) is a commercial bank division of First Citizens BancShares. The bank was previously the primary subsidiary of SVB Financial Group, a publicly traded bank holding company that had offices in 15 U.S. states and over a dozen international jurisdictions.

As a regional bank in the San Francisco Bay Area, SVB offer[ed] services specifically designed to meet the needs of the tech industry, and soon became the largest bank by deposits in Silicon Valley and the preferred bank of almost half of all venture-backed tech startups. In March 2023, after central bank–endorsed interest rate hikes during the 2021–2023 inflation spike, there was a bank run on its deposits, which led to its collapse and seizure on March 10, 2023 by the California Department of Financial Protection and Innovation (DFPI), its regulator. Citing inadequate liquidity and insolvency, state officials at the DFPI appointed the Federal Deposit Insurance Corporation (FDIC) receiver of the bank. This was, at the time, the second-largest bank failure in U.S. history, later surpassed by the collapse of First Republic Bank during the March 2023 United States bank failures.

On March 12, 2023, a joint statement was issued by Secretary of the Treasury Janet Yellen, Federal Reserve Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg, stating that all depositors at SVB would be fully protected and would have access to both insured and uninsured deposits starting the following Monday, March 13. The FDIC then established a bridge bank successor, Silicon Valley Bridge Bank, N.A., which quickly assumed ongoing business. On March 27, 2023, First Citizens Bank & Trust Company, a subsidiary of First Citizens BancShares, assumed all customer deposits and acquired all loans of Silicon Valley Bridge Bank from the FDIC and began operating all SVB branches.

Silicon Valley Bank was founded as a state-chartered bank in 1983 by Wells Fargo executive Bill Biggerstaff and Stanford University professor Robert Medearis to focus on the needs of startup companies. The two former Bank of America managers and tennis buddies came up with the idea over a game of poker in Pajaro Dunes, California. They hired Roger V. Smith, who had previously headed a high-tech lending unit at Wells Fargo, to be the bank's first CEO and president. The bank launched on October 17, 1983, as a wholly owned subsidiary of Silicon Valley Bancshares (now SVB Financial Group). It lined up 100 initial investors, including NFL quarterback Jim Plunkett, and well-connected former U.S. representative Pete McCloskey joined its board to give the bank credibility with the venture capital community. The bank's first office was located on North First Street in San Jose.

When Silicon Valley Bank was founded, the banking industry did not have a good understanding of startup companies, particularly those that lacked revenue. The bank structured its loans with the understanding that startups do not earn revenue immediately, managing risk based on their business model. The bank connected customers to its extensive venture capital, law, and accounting firm network. Its main strategy was collecting deposits from businesses financed through venture capital. It then expanded into banking and financing venture capitalists, adding services to allow the bank to keep clients as they matured from their startup phase. Initially, startup founders seeking loans from the bank had to pledge about half of their shares as collateral, but the rate later fell to about seven percent, reflecting a low failure rate and founders' tendency to pay off the loans to stay in control of the company. The bank covered losses by selling the shares to interested investors. Eventually, it became common for venture capital firms' term sheets to require startups to create a bank account at Silicon Valley Bank specifically. For its part, the bank prioritized startups that received funding from top-tier venture capital firms, such as Sequoia Capital, New Enterprise Associates, or Kleiner Perkins, as a way to reduce risk.

During the 1980s, the bank grew with the local high-tech economy, achieving 21 consecutive quarters of profitability. It went from a loss of $39,000 in 1985 to a profit of $12.3 million in 1991. In 1986, SVB acquired National InterCity Bank of Santa Clara. It opened its first office on the East Coast in 1990, near Boston, to serve the Massachusetts Route 128 tech corridor.

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 resulted in a $2.2 million loss for the bank in 1992, and by 1995 the portfolio percentage had fallen to 10%. In 1993, John C. Dean was appointed CEO, with Smith becoming vice chairman. The bank added a winery lending business in 1994.

The wave of computer technology startups during the dot-com bubble provided an influx of business for the bank, which was noted for its willingness to lend to venture-stage companies that were not yet profitable. Among its approximately 2,000 clients in 1995 were networking innovators Cisco Systems and Bay Networks. That year, the bank moved its headquarters from San Jose to Santa Clara. The holding company's stock price soared through the bubble but fell 50% when the bubble burst. The bank continued to add branches in technology hubs across the country. Ken Wilcox became CEO in 2000 and chose to continue the company's niche focus on technology companies rather than diversifying into a broader commercial bank.