Silicon Valley investors and founders express shock over SVB’s collapse

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Silicon Valley investors and founders express shock over SVB’s collapse, describe struggles to get money out

• As Silicon Valley Bank was shuttered by the FDIC on Friday, investors and companies with money locked up expressed dismay at how it went down.
  
• Many venture capitalists likened the collapse to a Twitter-led bank run, based more on unjustified fear than reality.
  
• Investors were urging their portfolio companies to allocate money to other banks so they could pay their employees on time.
  

Venture capitalists and technology executives are scrambling to make sense of and account for the potential repercussions of the sudden implosion of Silicon Valley Bank on Friday.

The Federal Deposit Insurance Corporation, or FDIC, said Friday that U.S. federal regulators shut down Silicon Valley Bank

, the premier financial institution for Silicon Valley tech startups for the past 40 years. The collapse of SVB represents the biggest banking failure since the 2008 global economic crisis.

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Widespread Panic Hits the Banks as Fears of a Systemic Liquidity Crisis Cause a Massive Bank Run

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9 questions about Silicon Valley Bank’s collapse, answered

If you work in tech, you had probably heard of Silicon Valley Bank before now. If you’re not familiar with this seemingly regional bank, nobody’s blaming you. It had billions of dollars in deposits, but fewer than two dozen branches, and generally catered to a very specific crowd of startups, venture capitalists, and tech firms. Anyway, you’re here now — Silicon Valley Bank isn’t.

Banking regulators shut down Silicon Valley Bank, or SVB, on Friday after the bank suffered a sudden, swift collapse, marking the second-largest bank failure in US history. Just two days prior, SVB signaled that it was facing a cash crunch. It first tried to raise money by selling shares, then it tried to sell itself, but the whole thing spooked investors, and ultimately, it went under.

The incident has sent shock waves across the tech sector. Many companies and people with money in SVB moved to pull it out earlier in the week — actions that, ironically, contributed to the bank’s demise. But, presumably not everyone was able to get their cash out, and the FDIC only insures deposits up to $250,000, so customers who had more than that in SVB are in a pickle.

Beyond tech, this has caused some shakiness across the banking industry amid concerns that other banks could be in trouble or that contagion could set in. (It’s important to note for consumers here that, really, the money you have in the bank right now is almost definitely fine.) SVB’s blowup is a big deal and a symptom of bigger forces in motion in tech, finance, and the economy.

Still confused about what’s going on? Here are the answers to nine questions you might just have.

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Bill Ackman says U.S. did the ‘right thing’ in protecting SVB depositors. Not everyone agrees

• Billionaire investor Bill Ackman said the U.S. government’s intervention to protect depositors after the implosion of Silicon Valley Bank, is “not a bailout” and helps restore confidence in the banking system.
  
• In a tweet, Pershing Square CEO said SVB’s fallout on Monday noted the government did the “right thing.”
  
• But not all Wall Street analysts are convinced the regulators action will shore up confidence in the U.S. banking system and limit the fallout. 
  
• “I don’t think that you can understate the danger that the American banking system is in,” veteran bank analyst Dick Bove, told CNBC’s “Squawk Box Asia” on Monday.
  

Billionaire investor Bill Ackman said the U.S. government’s action to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system.

In his latest tweet on SVB’s collapse, the hedge fund investor said the U.S. government did the “right thing.”

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