Silicon Valley Bank and Inside/Outside Stories

Thom Weidlich 03.16.23


From a communications point of view, the Silicon Valley Bank saga is largely one of “inside/outside” stories. To the outside world, the company was communicating a rosy, business-as-usual picture. Inside, the situation was different. This sort of thing usually doesn’t end well.

The press has latched onto a speech CEO Gregory Becker gave early last week, just days before the bank cratered. With his typical confidence (yes, once again, this is a story of overoptimism), he told Wall Street analysts and technology executives that the outlook for the industry and his bank that served it was fine and dandy.

And yet, a week before that speech, Moody’s told the bank its bond rating could be downgraded to junk, and Becker was working to raise cash and right the ship, according to a piece by New York Times reporter Maureen Farrell (among other articles). The CEO also knew that, due to rising interest rates, the long-term Treasury bonds it held were declining in value and its business advising on initial-public offerings was hurting.

FDIC Takeover

Of course, word of the woes leaked out. Last Thursday, Silicon Valley Bank’s stock fell 40 percent and depositors pulled out $42 billion (that’s in one day). On Friday, the Federal Deposit Insurance Corporation took over.

Even on that dismal Thursday, Becker told investors the bank had plenty of liquidity, but said any negative gossip could present challenges, according to The New York Times. His fear of a bank run didn’t prevent the bank run.

Over the weekend, as related by Puck reporter Theodore Schleifer, denizens across Silicon Valley gathered in their own crisis powwows to try to find a buyer for the bank or to ensure all depositors got a full bailout (which they eventually did).

Non-Tech Companies

At one point, according to Schleifer, venture capitalist and Silicon Valley macher Ron Conway wanted a list of non-tech companies, such as winemakers and farms, that used Silicon Valley Bank and would struggle to make payrolls. That was a smart crisis communications idea, because the public picture was that any bailout would be for a bunch of techie fat cats.

Since taking over, the new bank, Silicon Valley Bridge Bank, has in the past few days been energetic about issuing communications. These include a statement on the bank being open for business, an update from the new CEO and details for counterparties.

So yes, the sad Silicon Valley Bank story is largely one of bad risk management in the investment sense — we now know that for much of last year it didn’t even have a chief risk officer. But bad — or overly optimistic — communications didn’t help.

Photo Credit: Michael Vi/Shutterstock

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