A top venture capitalist believes Silicon Valley Bank’s collapse was caused more by a banking crisis than by technology. The SVB crisis was caused by “utterly irresponsible” practices by Silicon Valley Bank and its management, including taking short-term deposits from VCs and investing them in long-term debt, said Anne Glover, CEO of Amadeus Capital. “It is a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London.
Several startups and venture capital firms withdrew their money en masse from SVB amid concerns over its financial health, forcing the government to take over. The firm had made an earlier attempt to raise $2.25 billion to fill a $1.8 billion hole in its balance sheet caused by selling $21 billion worth of bonds at a loss. The bank was a crucial pillar of the tech industry, providing financing to firms that traditional banks often turned down. “They took cash deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the interest rates went up,” Glover added. “They didn’t hedge the interest rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.” Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1 in a government and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits. Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”
