Mar 13, 2023 · 52m · news
Jackie Reses & Kris Dickson: What Happened with SVB? Are VCs to Blame? | E988 · 20VC with Harry Stebbings
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On the 20VC podcast, financial experts Jackie Reses and Kris Dickson break down the structural, psychological, and strategic failures behind the sudden collapse of Silicon Valley Bank (SVB). They provide critical context on the roles of venture capitalists, social media, and regulatory bodies while offering practical treasury and risk-management advice for startup founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 12.7% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 6.8 Guest disagreement 1.8 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 45:51 Kris reacts to intermingling corporate and personal funds
Kris shows visible shock and forcefully dismisses the host's inquiry about founders moving corporate cash into personal accounts, citing severe tax and audit violations.
Hardest push from Harry ▶ 19:43 Host challenges whether balance sheet health still mattersHost refuses the standard risk management framing, directly challenging Kris with the provocative argument that balance sheet health no longer matters compared to raw consumer psychology.
Biggest teaching moment ▶ 2:11 Kris breaks down SVB's duration mismatch and HTM gapKris delivers a masterclass explanation of held-to-maturity accounting, interest rate duration risk, and the $15 billion mark-to-market gap that triggered the panic.
Harry holds his own ▶ 32:26 Host raises the 10% deposit cap regulatory limitHost demonstrates concrete regulatory expertise by pointing out the 10% national deposit cap that limits megabanks like JP Morgan from easily acquiring SVB.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Why Did Silicon Valley Bank Fail? | 2 | 8 | 1 | 1 | Host asks a straightforward question about why SVB failed. Kris Dickson delivers a thorough financial masterclass detailing held-to-maturity securities, Fed rate increases, and the $15 billion mark-to-market loss gap that triggered the deposit run. | |
| SVB's PR and Communication Failures | 2 | 7 | 1 | 1 | Host prompts Jackie on PR and strategic communications mistakes. Jackie explains the fatal flaw in order of operations—announcing a capital raise before securing it, which triggered bank run psychology among VCs. | |
| Are Venture Capitalists to Blame? | 5 | 6 | 2 | 5 | Host pushes back on Twitter narratives by citing a conversation with a pension fund CIO blaming VCs and asking if that blame is fair. Jackie reframes the dynamic around fiduciary duty and panic dynamics. | |
| The Role of Social Media and Digital Banking in Bank Runs | 3 | 6 | 1 | 2 | Host asks how digital banking and social media accelerated the bank run. Jackie educates on long-term VC deposit control changes and contrasts US bank risks with Canadian bank resilience during 2008. | |
| Concentration Risk vs. The Value of Community Banking | 5 | 7 | 3 | 5 | Host pushes two provocative questions—first asking why bank concentration in top banks is bad, then proposing that bank balance sheet health no longer matters compared to consumer psychology. Kris directly rejects the latter premise. | |
| FDIC Intervention and the Liquidation Process | 5 | 7 | 1 | 3 | Host asks practical liquidation questions and brings up specific regulatory hurdles like the 10% deposit concentration limit for megabanks considering buying SVB. Guests explain FDIC waterfall mechanics and receivership claim trading. | |
| Preventing Contagion and Alternate Bank Runs | 3 | 6 | 1 | 2 | Host asks for best-case and worst-case scenarios regarding bank contagion. Jackie breaks down the exact three steps required by regulators to restore market confidence before Monday trading opens. | |
| Practical Advice and Best Practices for Founders | 3 | 8 | 4 | 2 | Host asks founder questions including whether moving company funds to personal checking accounts on trust is permissible. Kris and Jackie forcefully reject the premise, warning strongly against commingling corporate and personal assets. | |
| Separating Rumors from Reality and Future Predictions | 2 | 6 | 2 | 1 | Host asks for final predictions and public misconceptions. Jackie dispels social media rumor-mongering, explaining FDIC fiduciary boundaries and business continuity planning. |
Statements from this episode (23)
Dickson: Lehman Brothers Estate Distributed Over $129B by End of 2022
“Through the end of twenty-twenty-two, that estate had liquidated and distributed over a hundred twenty-nine billion dollars of assets.”
Dickson: SVB invested over $90B in long-dated MBS
“So SVB invested heavily in long-dated securities, over ninety billion dollars, mostly in MBS with maturities greater than 10 years.”
Dickson: SVB's $15B mark-to-market gap exceeded its Q4 market cap
“At the end of 22, they reported ninety-one billion dollars of held to maturity securities, with the actual value of seventy-six billion. That 15, fifteen billion dollar gap Was bigger than their market cap for most of the fourth quarter.”
Dickson: SVB depositors tried to withdraw over $40B in one day
“When that didn't materialize, depositors panicked and attempted to withdraw over forty billion dollars in a single day.”
Reses: SVB made a critical error by announcing an unclosed capital raise
“They should have raised the money. Made the announcement that they raised the money and that they were in great position. And so that dynamic and the advice they were getting in that situation, very unusual.”
Dickson: FDIC reported $620B in unrealized US bank losses in Q4 2022
“The report noted that banks' aggregate unrealized losses on securities remain, in their words, elevated at six hundred twenty billion dollars in Q-IV. In fact, throughout 2022, these unrealized losses were materially higher than at any other time in the last 1…”
Reses pulled Apax credit lines from her hospital bed during 2008 crisis
“I recall 2008 My third child was born October second, 2008. And there was a bank that was failing in Europe. And I remember I was the only partner. This was at apex partners. I was the only partner in the United States that could actually pull credit lines in …”
Reses: Startups made major mistakes concentrating all capital at SVB
“A lot of companies made a lot of mistakes about their own assessment of risk. In addition to just, you know, the powder keg that happened the moment people realized that SVB might be a challenge.”
Reses: VCs will start requiring treasury controls and multi-bank strategies from startups
“I think it'll change the dynamic for how people manage their deposits going forward. Like I would not be surprised going forward if when a venture backed company raises money that VCs don't demand that they take controls over where they put their funding, how …”
Reses: Depositors will shift capital to systemically important and regional banks
“I mean, I do think you'll see an orientation towards de-risking your deposit base and trying to orient towards systemically important banks or big regional banks like a PNC, and I do think that, that people will be oriented.”
Dickson: Only nine US banks failed in five years post-financial crisis reforms
“After, after Lehman's collapse, and that the global financial crisis, almost 400 banks failed in this three years after Lehman went down. And so then the regulatory frameworks were amped up, liquidity and capital requirements were amped up, and in the last fiv…”
Dickson: FDIC-insured US banks halved over 20 years to 4,700
“There are about 4700 FDIC-insured banks today. That's already down by half from 20 years ago, as they have shut down and been gobbled up by the larger banks.”
Dickson: Capital concentration into mega-banks would be a travesty
“The community and regional banking system is the lifeblood of our Main Street economy, and if the outcome of all of this is a super concentration of funding and control of the banking system into systemically important institutions, that would be a travesty.”
Reses: Square was the only tech company to build a bank
“And so, you know, and we built a bank at Square. We were the only tech company to ever have built a bank, right?”
Dickson: SVB failed due to duration and concentration risks, not credit risk
“For SVB, but unlike Lehman, their investments were in agency-backed MBS and Treasuries, relatively conservative and low risk at the time. They just went long on duration for their investments, and they had concentration risk in their depositor base.”
Reses: SVB staff signed four-week contracts with FDIC
“So in the case of SVB, for example, the team at SVB has signed four-week contracts with the FDIC.”
Reses: Only 2% of SVB depositors were under $250k limit
“SVB also was uniquely concentrated in terms of larger deposits. I think only two percent of their depositors were below the 250,000 amount per account. The rest were above.”
Dickson: SVB asset values exceeded total deposits at year end
“Now, if a quick look at their, and SVB's balance sheet as of year end if you take the market value of their investment portfolio, both the AFS securities and the health for maturity securities plus their loan portfolio, which should be saleable it's more than …”
Reses: Regulators will pull out all stops for weekend SVB deal
“The regulators are highly incented to get a buyer for this business this weekend, and so going back to oh eight, as the example, they're, they will pull out all the stops in order to get it to the Likely and best outcome possible for American insurers.”
Reses: Banks with concentrated customer bases will face panic deposit withdrawals
“And I do think those banks will start to see deposit pulls just out of panic, even if they have a very strong balance sheet.”
Reses: First Republic disclosed 9% tech deposit exposure during SVB crisis
“They put out a notice on, on Friday that said, only 15% of our securities are, or 15, 15% of our assets are, you know, securities. Nine percent of our deposit base is tech, you know, broadly diversified.”
Reses: Founders should transfer funds to systemically important banks
“If it were me, I would be moving money to Citigroup, JP Morgan, Truist, you know, those kinds of companies, you know, but that's me personally.”
Dickson: FDIC will orchestrate SVB sale to prevent systemic crisis
“I'm in complete agreement because I think the FDIC is fully aware that the potential crisis of confidence among depositors is something that must be avoided at all costs, and the simplest and most elegant solution to that is orchestrating continuity through a …”