What Silicon Valley Bank's collapse means for your money

Executive overview

Silicon Valley Bank failed because startups mass-withdrew deposits, forcing the bank to sell long-term securities at a loss — triggering a bank run that brought it down. The FDIC's $250k insurance limit is nearly irrelevant when the average startup deposit is $10–15M. The government stepped in and made depositors whole, but the broader pattern — banks investing short-term deposits in long-term bonds — is systemic.

When a bank run can happen anywhere, the only protection is spreading risk and owning assets no bank can freeze.

How Silicon Valley Bank collapsed

• Deposits surged from $60B (2019) to $190B (2021) as startup funding boomed
• Funds were invested in long-term Treasuries at low interest rates
• As rates rose to 5%, startups began withdrawing to cover operating costs
• The bank sold securities at a $1.9B loss to meet withdrawals, spooking the market
• A wave of private messages ("just a friendly tip — move your money") triggered a bank run
• $42B in withdrawal attempts forced the FDIC to shut it down

Why the $250k FDIC limit doesn't protect startups

• Average SVB deposit was $10–15M — far above the insured limit
• Founders with $6–10M in SVB faced a weekend of total uncertainty
• The government eventually covered 100% of deposits — but that outcome wasn't guaranteed
• Credit Suisse collapsed; Deutsche Bank came under pressure — the problem is not isolated to the US

Practical steps to reduce bank risk

• Open accounts at multiple banks; keep each balance near the FDIC limit
• Some banks (e.g. Mercury) have raised effective insurance coverage to ~$1M
• Stocks and bonds held at a brokerage are owned in your name — if the brokerage fails, assets transfer, not disappear
• Consider bank accounts in multiple countries, but research carefully (Cyprus nationalized deposits during its crisis)

Rethinking what "safe" means for wealth

• Luxury watches and designer bags are holding value as people treat them as inflation hedges
• Travel, education, and experiences can't be seized or devalued by a bank failure
• Optimising purely for savings assumes the system is stable — recent events challenge that assumption
• Some investors still hold Bitcoin as a hedge, but concentration risk remains a concern