A financial free fall is happening right now in the Bay Area.
One of the most trusted local banks is in trouble and now there's growing concern that some companies are withdrawing their funds, which could spell doom.
We’re talking about Silicon Valley Bank (SVB), based in Santa Clara, which has been around for 40 years.
It has been the go-to place for venture capitalists and startups to do business and keep money.
On Thursday, the bank lost 60% of its stock value, another 20% wiped away after hours.
So what happened?
Tech
Well, business has been slow, very few IPOs mean venture capital funding has slowed and deals have been scarce.
Then, on Wednesday, the bank began a massive $1.75 billion securities sale to try to offset its earlier losses.
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That scared investors and venture capitalists. They’re been debating whether to pull their money out of SVB or ride it out.
Mac Conwell is the founder of RareBreed Ventures. He's heavily into tech and he's struggling with that very decision right now.
"Once the panic starts, you as an individual firm or company aren't going to stop it,” he said. “So now it puts you in a very tough position of like ‘I still believe in Silicon Valley Bank, I believe it is a healthy bank’, but if everybody else is starting to make a run on the bank, I have to make the prudent decision of, ‘can I take the risk?’ And if anybody knows, as a VC, our whole job is about de-risking companies,”
This is affecting all banks, even major banks saw stock values fall. But SVB is unique in that it's hit the hardest by what VCs and startups do.
