Mar 11, 2023 · 1h 29m · allin
E119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
David Friedberg · 23m spoken David Sacks · 22m spoken Chamath Palihapitiya · 17m spoken Jason Calacanis · 16m spoken
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In this emergency episode of the All-In Podcast, hosts Jason Calacanis, Chamath Palihapitiya, David Sacks, and David Friedberg break down the sudden collapse of Silicon Valley Bank (SVB), dissecting its root financial causes, systemic threats to tech startups, regulatory failures, and the critical need for emergency government deposit guarantees to prevent widespread banking contagion.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 99.7% of the talking time here. How this is scored →
The hosts as informed peer 8.1 Guest teaching 3.6 Guest disagreement 3.8 The hosts pushing back 4.3
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 25:01 Sacks interrupts Friedberg on venture debt
Sacks aggressively rejects Friedberg's defense of venture debt, interrupting him with 'There is no commitment!' and insisting that using customer deposits to fund startup loans creates systemic failure.
Hardest push from the hosts ▶ 32:03 Sacks refuses Friedberg's financial engineering framingSacks flatly refuses Friedberg's narrative about portfolio laddering, calling it Enron and LTCM style financial engineering that relies on illiquid assets and un-marked bond losses.
Biggest teaching moment ▶ 9:00 Friedberg breaks down SVB's financial balance sheetFriedberg educates the panel on SVB's balance sheet mechanics, explaining how long-duration bond devaluations relative to immediate deposit liabilities caused the insolvency.
The host holds their own ▶ 52:47 Sacks details $620B unrealized bank loss statistics and game theorySacks demonstrates deep domain knowledge by citing Wall Street Journal figures on $620 billion in unrealized bank treasury losses to articulate the broader regional bank contagion threat.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Emergency Podcast Announcement and Banter | 8 | 6 | 2 | 2 | David Friedberg delivers a structured technical breakdown of SVB's balance sheet, contrasting customer deposit liabilities with longer-duration assets like available-for-sale treasuries and hold-to-maturity securities. Chamath Palihapitiya briefly interjects to clarify that SVB primarily bought mortgage-backed securities rather than pure treasuries. | |
| Assigning Culpability: Founders, SVB, and Regulators | 8 | 3 | 2 | 3 | Chamath systematically categorizes responsibility into three distinct buckets: venture capital governance failures, SVB executive duration-mismatch miscalculations, and regulatory accounting loopholes. David Sacks builds on this by identifying the specific accounting loophole that allowed banks to avoid marking ten-year bonds to market. | |
| Venture Debt Risks and Governance Breakdown | 8 | 5 | 7 | 7 | David Sacks and David Friedberg clash sharply over venture debt. Friedberg defends the asset class based on historical 18 percent industry returns, while Sacks pushes back forcefully, arguing that past performance was inflated by a bull market and that funding creditless startups using customer deposits creates severe systemic risk. | |
| Risk Management Debate and Regulatory Negligence | 8 | 4 | 6 | 7 | Sacks rejects Friedberg's defense of bank balance sheet laddering, explicitly comparing SVB's financial engineering to Long-Term Capital Management and Enron. Sacks also criticizes Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen for failing to foresee systemic risks stemming from rapid rate hikes. | |
| Mechanics of the Bank Run and Startup Impact | 8 | 3 | 3 | 4 | The hosts examine how frozen sweep accounts and receivership mechanics threaten routine operational functions like payroll across thousands of tech and non-tech businesses. Chamath and Jason Calacanis debate potential government interventions, including whether public backstops should include taxpayer equity warrants. | |
| Game Theory of Bank Runs and Market Reaction | 9 | 4 | 5 | 6 | Sacks outlines the game theory of bank runs, arguing that moving deposits out of regional banks to top-four institutions represents a rational actor response rather than irrational panic. The group analyzes breaking regulatory findings showing a $42 billion single-day deposit withdrawal from SVB. | |
| VC SVB Exposure and Craft Ventures Case Study | 8 | 2 | 2 | 2 | Chamath references SEC filings to reveal that nearly every major Silicon Valley VC firm maintained accounts at SVB. Sacks provides a case study of Craft Ventures, explaining how they successfully swept $45 million just before the freeze while scrambling to assist portfolio founders. | |
| Regional Bank Contagion and Depositor Protection | 8 | 2 | 3 | 3 | Friedberg and Sacks propose an emergency $500 billion backstop facility to restore confidence across regional banks without requiring active taxpayer expenditures. Sacks emphasizes the policy distinction between bailing out equity shareholders versus protecting business depositors. |
Statements from this episode (33)
Sacks: SVB collapse is a Lehman-sized event for Silicon Valley
“This is basically a Lehman sized event for Silicon Valley.”
Sacks: Fed inaction over weekend could spark regional bank runs
“Unless the Fed steps in here over the weekend, we're going to see potentially a run on the regional banking system, a Cascade like we saw in 2008.”
Calacanis: Silicon Valley Bank serves 50% of venture-backed startups
“Silicon Valley Bank is used by 50% of venture backed startups.”
Friedberg: SVB had $195B in total liabilities at end of 2022
“In total, Silicon Valley Bank at the end of the year had about one hundred and ninety five billion dollars In liabilities, one hundred and seventy three billion of customer deposits that they owe to customers and twenty two billion of other debt.”
Friedberg: SVB warrant profits dropped from $560M in 2021 to $148M in 2022
“They made five hundred sixty million dollars in profit on their warrants that they had in their venture debt portfolio in 20, 21. That number collapsed to one 48 in 20, 22.”
Friedberg: Silicon Valley Bank had only $15 billion in true net book value
“They only had fifteen billion dollars of true net book value, which is the difference between their assets and their liabilities.”
Chamath: Social Capital required all portfolio companies to extend cash runway to mid-2025
“In our portfolio, my partners and I walked into every company and made them have at least enough money to get through mid- twenty-twenty-five, right?”
Sacks: 10% of SVB's portfolio was venture debt to creditless startups
“10% of their portfolio is basically being loaned out to startups who have no credit.”
Friedberg: Venture debt industry has typically generated 18% returns
“The asset as a, as an asset class, we can make fun of it all we want. It's actually performed pretty well. These guys have generated typically 18% as an industry.”
Sacks: Venture debt asset class breaks when startup up-rounds stop
“I believe that the data for all these models is, is skewed because it assumes again, an environment in which companies keep raising up rounds. And as soon as you get into a crisis in which that breaks, then the whole asset class breaks.”
Chamath: Venture debt is sole private credit segment funded by customer deposits
“You can't use customer, customer deposits to do some CLO deal or to do like, you know, to back a PE play. These are all LP capital that goes towards that. This is the only sliver, as far as I know, where you take customer deposits to create very risky loans wr…”
Sacks: Craft Ventures instructed portfolio founders to cut burn in early 2022
“We started doing portfolio updates with our entire portfolio of founders in February last year saying this is a regime change. You gotta cut costs. We did another one in May. You can watch them both on YouTube. Okay. And we were telling founders, cut your burn…”
Friedberg: Venture debt comprised only 10% of SVB's loan portfolio
“If you look at SVB's loan portfolio, 70% are really these asset-backed loans, which are 56% of the portfolio is like, you know, pre-payments on, on LP commitments, and then 14% is private banking loans, which is loans against, you know, public securities that …”
Sacks: Deposit banks must hold fully liquid, mark-to-market assets
“If you're a deposit bank, you should be required to keep all of your assets in fully liquid securities that you mark to market every day.”
Friedberg: Rippling missed payroll cycle due to Silicon Valley Bank collapse
“Today it was announced that Rippling, one of those companies could not hit their payroll cycle today, because they had money tied up at Silicon Valley Bank.”
Friedberg: Systemic bank runs will occur without immediate 100% deposit backstop
“If that money is not available to them within the first 48 or 72 hours of the end of this weekend, then we are going to have a real crisis on our hands, because then you will see a lot of people trying to move money away from any institution that stores their …”
Calacanis: TARP cost over $400B and generated a $15B profit
“TARP was just over four hundred billion dollars. It actually returned a fifteen billion dollar profit to the American people.”
Calacanis: US government could profit by backstopping SVB depositors
“I guarantee you, the US government could get some warrants on those companies or warrants and ownership in Silicon Valley Bank and make at least 50 cents on the dollar, maybe even double, and that's the way this bailout should be structured, and it has to be d…”
Sacks: US banks hold $620B in unrealized treasury losses
“So the Wall Street Journal right now is reporting that US banks have 620 Billion of unrealized losses just on treasuries.”
Calacanis: SVB contagion will kill tens of thousands of jobs
“Tens of thousands of highly paid workers, and not just tech workers, are going to be out of jobs, and they don't have jobs waiting for them at Amazon, or Google to bail them out, and this is the start of a contagion, if it doesn't get stopped, I believe that.”
Sacks: SVB collapse will cause a 60-day deal-making freeze
“Jake, how you tweeted that you think this is gonna cause a sixty-day freeze in, in deal-making activity. I think that's more or less right.”
Calacanis: Four portfolio companies face payroll crisis due to SVB freeze
“I have three open deals right now that we're doing. I now have to figure out how to get those deals done. And I have four companies that are in this payroll situation in a major way.”
Friedberg: SVB faced $42B in withdrawals against $40B in liquid assets
“Forty-two billion dollars of withdrawals is 25% of total deposits, but forty-two billion is greater than the fourteen billion of cash they had on hand, and the twenty-six billion of liquid securities that they had.”
Sacks: Withdrawing funds during a bank run is completely rational game theory
“The downside of taking your funds out immediately is zero. And the upside is you might save a hundred percent of your money. So it's a rational decision when confidence is lost to take out your money.”
Chamath: SEC filings show every major Silicon Valley VC had SVB custody accounts
“It's every single major VC in Silicon Valley.”
Sacks: Craft Ventures swept $45M from SVB right before its collapse
“We had about forty-five million dollars that we were about to distribute to LPs. And I'm like, whoa, that's crazy. So we were able to sweep that to an account we used to make in-kind distributions.”
Sacks: Big players are actively withdrawing money from other regional banks
“Big players are withdrawing their money from other banks right now out of an abundance of caution.”
Friedberg: A Fed deposit guarantee would stop banking panic without spending money
“If a federal agency comes in, if the Fed comes in and says, you know what, we are going to backstop all of these banks, and we are going to put five hundred billion dollars behind it, and we're going to guarantee that all these deposits are going to be made wh…”
Chamath: Even a traditional bank run cannot revive the crypto market
“Nothing can revive the crypto market as we're seeing today, even in a run on the bank, which is exactly what everybody was afraid of in a Bitcoin world. That thing is down.”
Sacks: Crypto is dumped first during financial panics because of high liquidity
“When people are panicking about the state of their finances and worried about getting access to their cash, The first thing they dump is crypto because it is very liquid.”
Sacks: QAnon Shaman Jacob Chansley did not assault anyone on January 6
“He didn't assault anyone. He just wandered through the capital, apparently getting a tour from police officers who were just guiding him through it.”