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Silicon Valley Bank

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Silicon Valley Bank
Company typePublic
IndustryFinancial services
Founded1983; 41 years ago (1983)
Founders
  • Bill Biggerstaff
  • Robert Medearis
HeadquartersSanta Clara, California, U.S.
Key people
RevenueIncrease US$7.40 billion (2022)
Decrease US$1.51 billion (2022)
Total assetsIncrease US$211.8 billion (2022)
Total equityDecrease US$16.0 billion (2022)
Number of employees
8,553 (December 2022)
ParentSVB Financial Group Edit this on Wikidata
SubsidiariesSVB Securities
Capital ratioTier 1 15.26% (2022)
Websitesvb.com
Footnotes / references
[1]
Silicon Valley Bank in Tempe, Arizona

Silicon Valley Bank (SVB) was a commercial bank headquartered in Santa Clara, California. SVB was one of the largest banks in the United States and was the biggest bank in Silicon Valley based on local deposits, with a 25.9% market share as of June 30, 2016.[2] It was a subsidiary of SVB Financial Group (formerly Silicon Valley Bancshares),[3] a bank holding company[4] and a member of the S&P 500 index.[5] On March 10, 2023, after a bank run on its deposits, it failed and was taken into receivership by the Federal Deposit Insurance Corporation in the second-largest bank failure in American financial history.[6]

The company focused on lending to technology companies, providing multiple services to venture capital, revenue-based financing and private equity firms that invest in technology and biotechnology, and also on private banking services for high-net-worth individuals, in its home market in Silicon Valley.[1][7][8] In addition to taking deposits and making loans, the bank operated venture capital and private equity divisions that sometimes invested in the firm's commercial banking clients.[9]

The bank operated from 29 offices in the United States and from offices in India, the United Kingdom, Israel, Canada, China, Germany, Hong Kong, Ireland, Denmark, and Sweden.[1][10][11]

History

Initial years (1983–1994)

Silicon Valley Bank (SVB) was founded as Silicon Valley Bancshares in 1983 by Bill Biggerstaff and Robert Medearis over a poker game.[12] Its first office opened in 1983 on North First Street in San Jose. The Palo Alto office opened in 1985.[13] The bank’s main strategy was collecting deposits from businesses financed through venture capital. It then expanded into banking and financing venture capitalists themselves, and added services to allow the bank to keep clients as they matured from their startup phase.[14] In 1986, SVB merged with National InterCity Bancorp and opened an office in Santa Clara. In 1988, the bank completed its IPO, raising $6 million. In the same year, they opened another office in San Jose. In 1990, the bank opened its first office on the East Coast, near Boston, to serve the Route 128 tech corridor. The following year, the bank went international with the launch of the companies Pacific Rim and Trade Finance.[13]

By the mid-1990s, the bank had provided early venture capital to Cisco Systems and Bay Networks.[15] In 1992, the bank was hit by the real estate burst (50% of the bank's assets) and recorded a $2.2 million yearly loss.[15] In 1993, the bank's founding CEO, Roger V. Smith, was replaced by John C. Dean; Smith became Vice Chairman of the bank.[16] Smith left in 1994 to launch the Smith Venture Group.[17] In 1994, the bank launched its Premium Wine Practice activities.[13]

Expansion (1995–2022)

In 1995, the bank moved its headquarters from San Jose to Santa Clara.[15] In 1997, SVB opened a branch in Atlanta.[18] In 1999, the company was reincorporated in Delaware.[13] From March 1999 to March 2000, SVB's stock value soared from $20 to $70.[18]

In 2000, SVB opened a branch in Florida.[18] In 2001, SVB Securities acquired the Palo Alto investment banking firm Alliant Partners for $100 million.[19] Following the crash of the dot-com bubble, the bank's stock dropped 50%.[20] In 2002, the bank began expanding its private banking business, which up to that point had been done primarily as a favor to wealthy venture capitalists and entrepreneurs.[21]

In 2004, the bank opened international subsidiaries in Bangalore, India, and London.[22][23] In 2005 it opened offices in Beijing and Israel. In 2006, the bank began operations in the UK and opened its first branch there in 2012.[9] In 2006, the bank also ceased its investment banking activities, launched after the 2001 dotcom crash.[20]

In December 2008, SVB Financial received a $235 million investment from the U.S. Treasury through the Troubled Asset Relief Program.[24] The U.S. Treasury received $10 million in dividends from Silicon Valley Bank and, in December 2009, the bank repurchased the outstanding stock and warrants held by the government, funding this through a stock sale of $300 million.[25]

In April 2011, Ken Wilcox, who had been CEO since 2000, left the CEO position, while remaining Chairman of the Board; he was replaced by Greg Becker as CEO.[26] By 2011 the bank had helped fund more than 30,000 start-ups.[27]

In November 2012, the bank announced a 50–50 joint venture with Shanghai Pudong Development Bank (SPDB) to provide capital to start-up technology entrepreneurs.[28] In July 2015, the joint venture was approved by the China Bank Regulatory Commission (CBRC) to operate in renminbi (RMB), the official currency of the People’s Republic of China. This license allows the joint venture to provide banking products and services to its clients in local Chinese currency.[29] According to the bank itself, in 2015 SVB was providing banking and financial services to 65% of all startups.[20]

In March 2017, Michael R. Descheneaux was named president of the company.[30]

In 2019, Leerink Partners LLC, now SVB Securities, was acquired by SVB Financial Group, the parent company of Silicon Valley Bank.[31]

In January 2021, the bank announced its plan to acquire Boston Private Financial Holdings (NASDAQ: BPFH), the parent company of Boston Private Bank & Trust Company, which expanded Silicon Valley Bank's wealth management solutions.[32]

Collapse

Main article: Collapse of Silicon Valley Bank

On March 9, 2023, shares of SVB Financial plunged more than 62% after the company proposed a share sale to shore up its balance sheet which had suffered a $1.8 billion loss on the sale of Treasury securities, due to rising interest rates.[33][34] Following the news, several venture capitalist firms including Founders Fund, Coatue Management, and Union Square Ventures advised their portfolio companies to withdraw their money out of SVB, contributing to a bank run.[35] SVB shares fell another 66% in pre-market trading on March 10, before trading was halted.[36][37]

Later on March 10, the bank was shut down by the California Department of Financial Protection and Innovation, citing inadequate liquidity and insolvency.[12] The state regulator appointed the Federal Deposit Insurance Corporation as receiver. The FDIC transferred insured deposits to a new institution, the Deposit Insurance National Bank of Santa Clara.[6][38][39][40] The failure of SVB was the largest of any bank since the 2008 financial crisis and the second-largest in US history.[41]

Outside of the US, the Bank of England issued a statement that it sought a court order to place the United Kingdom subsidiary of the bank into a Bank Insolvency Procedure.[42][43] In China, Shanghai Pudong Development Bank issued a statement that its joint operations with SVB were not impacted by the collapse of the US subsidiary.[44]

References

  1. ^ a b c "SVB Financial Group 2022 Annual Report (Form 10-K)". U.S. Securities and Exchange Commission. March 1, 2022. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  2. ^ Druzin, Bryce (October 3, 2016). "Big growth in Silicon Valley deposits for J.P. Morgan but Comerica takes a hit". American City Business Journals. Archived from the original on September 26, 2017. Retrieved October 17, 2017.
  3. ^ "Form 10-K: SVB Financial Group (formerly Silicon Valley Bancshares)". United States Securities and Exchange Commission. February 21, 2006.
  4. ^ "Big growth in Silicon Valley deposits for J.P. Morgan but Comerica takes a hit". American City Business Journals. October 3, 2016. Archived from the original on September 26, 2017. Retrieved October 17, 2017.
  5. ^ Assis, Claudia. "Silicon Valley Bank out of S&P 500 index; Insulet selected to replace it". MarketWatch. Archived from the original on March 11, 2023. Retrieved March 11, 2023.
  6. ^ a b "FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California" (Press release). Washington: Federal Deposit Insurance Corporation. March 10, 2023. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  7. ^ Reckard, E. Scott (August 8, 2015). "At Silicon Valley Bank, risky tech start-ups are lucrative business". Los Angeles Times. Archived from the original on May 20, 2017. Retrieved May 25, 2017.
  8. ^ Soper, Taylor (January 30, 2019). "Lighter Capital partners with Silicon Valley Bank to offer startups debt financing and banking services". GeekWire. Archived from the original on March 7, 2019. Retrieved March 6, 2019.
  9. ^ a b Murphy, Richard McGill (October 22, 2012). "Silicon Valley Bank: The bank for startups". Fortune. Archived from the original on June 20, 2017. Retrieved May 25, 2017.
  10. ^ "Silicon Valley Bank Opens in Canada" (Press release). PR Newswire. March 4, 2019. Archived from the original on April 1, 2020. Retrieved January 9, 2020.
  11. ^ "SVB Financial Group Expands IT and Engineering Team to Support Growth of the Innovation Economy" (Press release). PR Newswire. January 10, 2019. Archived from the original on March 10, 2023. Retrieved January 9, 2020.
  12. ^ a b Pollard, Amelia (March 10, 2023). "Silicon Valley Bank Collapses in Biggest Failure Since 2008". Bloomberg Law. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  13. ^ a b c d "Silicon Valley Bank celebrates 20 years of dedication to entrepreneurs". Svb.com. October 17, 2003. Archived from the original on June 16, 2020. Retrieved June 16, 2020.
  14. ^ Rooney, Ben (November 14, 2012). "Microsoft's Karia Jumps Ship to Silicon Valley Bank". The Wall Street Journal. Archived from the original on September 26, 2017. Retrieved May 25, 2017.
  15. ^ a b c Peter Sinton (May 22, 1995). "High-Tech Bank Loves Startups / Silicon Valley Bancshares makes money by serving young firms". San Francisco Chronicle. Archived from the original on June 16, 2020. Retrieved June 16, 2020.
  16. ^ Schubarth, Cromwell (June 1, 2015). "CEO Greg Becker on Silicon Valley Bank's bubble-proof growth". American City Business Journals. Archived from the original on September 27, 2017. Retrieved October 17, 2017.
  17. ^ "Roger V. Smith". Bloomberg L.P. Archived from the original on September 26, 2017. Retrieved May 25, 2017.
  18. ^ a b c Jim Freer (April 3, 2000). "Silicon Valley Bank plans Florida office". Bizjournals.com. Archived from the original on October 1, 2002. Retrieved June 16, 2020.
  19. ^ "Silicon Valley Bank to acquire Alliant Partners". Bizjournals.com. August 17, 2001. Archived from the original on February 22, 2004. Retrieved June 16, 2020.
  20. ^ a b c Nathaniel Popper (April 1, 2015). "Silicon Valley Bank Strengthens Its Roots". The New York Times. Archived from the original on April 1, 2020. Retrieved June 16, 2020.
  21. ^ Lacy, Sarah (August 17, 2003). "Silicon Valley Bank targeting San Jose for private banking". American City Business Journals. Archived from the original on September 27, 2017. Retrieved October 17, 2017.
  22. ^ "Silicon Valley Bank opens B'lore unit". Siliconindia.com. October 15, 2004. Archived from the original on June 16, 2020. Retrieved June 16, 2020.
  23. ^ Lacy, Sarah (September 12, 2004). "Silicon Valley Bank extends reach to Bangalore, London". American City Business Journals. Archived from the original on September 27, 2017. Retrieved October 17, 2017.
  24. ^ "SVB Financial Becomes Second Local Bank To Partake In TARP Program". The Mercury News. December 3, 2008. Archived from the original on September 27, 2017. Retrieved November 14, 2012.
  25. ^ Calvey, Mark (December 18, 2009). "Silicon Valley Bank's parent to repay all its $235M in TARP money". American City Business Journals. Archived from the original on September 27, 2017. Retrieved October 17, 2017.
  26. ^ Calvey, Mark (January 20, 2011). "CEO of Silicon Valley Bank's parent stepping down". American City Business Journals. Archived from the original on August 14, 2014. Retrieved October 17, 2017.
  27. ^ Boudreau, John (October 16, 2011). "Silicon Valley Bank works to import startup culture to China". San Jose Mercury News. Archived from the original on May 28, 2017. Retrieved May 25, 2017.
  28. ^ Muncaster, Phil (August 20, 2012). "Silicon Valley comes to China to spur tech innovation". The Register. Archived from the original on September 26, 2017. Retrieved September 11, 2017.
  29. ^ "Silicon Valley Bank's Joint Venture in China Receives License to Transact in Local Currency" (Press release). PR Newswire. August 6, 2015. Archived from the original on October 17, 2017. Retrieved October 17, 2017.
  30. ^ "Silicon Valley Bank and SVB Financial Group name new president, CFO". American City Business Journals. May 12, 2017. Archived from the original on September 27, 2017. Retrieved October 17, 2017.
  31. ^ Group, SVB Financial. "SVB Financial Group Completes Acquisition of Healthcare Investment Bank Leerink Partners". PR Newswire. Archived from the original on February 1, 2019. Retrieved January 31, 2019.
  32. ^ "SVB". Archived from the original on January 2, 2023. Retrieved January 2, 2023.
  33. ^ Pound, Jesse (March 10, 2023). "Shares of SVB Financial fall 60% as tech-focused bank looks to raise more cash". CNBC. Archived from the original on March 9, 2023. Retrieved March 10, 2023.
  34. ^ "Silicon Valley Bank shares plunge on stock-sale plan to stem cash burn". Reuters. Archived from the original on March 9, 2023. Retrieved March 9, 2023.
  35. ^ Miller, Hannah (March 10, 2023). "SVB Races to Prevent a Bank Run as Funds Advise Pulling Cash". Bloomberg Law. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  36. ^ Rees, Kit; Turner, Matt (March 10, 2023). "SVB Shares Halted for Pending News After Sinking Another 69%". Bloomberg. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  37. ^ "SVB in talks to sell itself; shares halted after tumbling 66% in premarket trading". The Economic Times. March 10, 2023. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  38. ^ Pound, Jesse. "Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits". CNBC. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  39. ^ Levin, Benjamin (March 9, 2023). "Silicon Valley Bank Fails as FDIC Takes Over, Appoints Receiver". Bloomberg Law. Archived from the original on March 10, 2023. Retrieved March 10, 2023.
  40. ^ Cimilluca, Rachel Louise Ensign, Corrie Driebusch and Dana (March 10, 2023). "Silicon Valley Bank Closed by Regulators". The Wall Street Journal. Archived from the original on March 10, 2023. Retrieved March 10, 2023.{{cite news}}: CS1 maint: multiple names: authors list (link)
  41. ^ English, Angela Palumbo, Karishma Vanjani, Carleton. "Silicon Valley Bank Shut Down, Biggest Bank to Fail Since Financial Crisis". MarketWatch. Archived from the original on March 10, 2023. Retrieved March 10, 2023.{{cite web}}: CS1 maint: multiple names: authors list (link)
  42. ^ "Bank of England seeks to wind up Silicon Valley Bank's UK arm". Reuters. March 11, 2023. Retrieved March 11, 2023.
  43. ^ "Bank of England statement: Silicon Valley Bank UK" (Press release). Bank of England. March 10, 2023. Retrieved March 10, 2023.
  44. ^ "SVB's China Partner Urges Calm, Says Business Not Affected". Bloomberg News. March 10, 2023. Retrieved March 10, 2023.
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