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The Silicon Valley Bank Run

The Silicon Valley Bank Run

Investors frantically urge companies to pull their funds

Michael Dwyer
March 10, 2023

Happy Friday, this is LGTM. The newsletter for quiet quitters who still have a job somehow.

Here’s what we have for you this week:

Bank Run in Silicon Valley
Spotify gets Tiktokified

Silicon Valley Bank Tanks

Silicon Valley Bank appears to be in serious trouble. You probably don’t think too much about Silicon Valley Bank because you’ve spent your career “quiet quitting” and creating Jira ticket make work rather than starting actual companies but if you did you’d understand it is a big deal. Nearly every venture capital dollar flows through the bank and almost all startups have an account. If Silicon Valley Bank were to become insolvent it would be a disaster for the tech industry, like when the dot-com bubble burst or when Patagonia stopped selling corporate branded vests.

The fears around Silicon Valley Bank’s solvency began when the company announced it would issue new equity to raise cash. Shares slid from $260 to around $80 the following day.

We don’t know exactly how bad the bank’s cash crunch is but healthy companies don’t typically sell equity to fund normal business operations. There’s a few factors that got them here:

The tech industry has had a bad year, valuations for startups were cut and venture capital firms have had more trouble raising capital than in the past. Without easy access to VC funding, startups have had to spend down their cash accounts.
Most of Silicon Valley Bank’s loans are to startups that, due to the tougher funding climate, are more likely to default that previously expected.
Silicon Valley Bank holds a substantial portion of deposits in long-term treasuries, which are highly sensitive to interest rates. Rates have risen rapidly over the past year and long term treasuries have lost value in response.

It all adds up to a pretty ugly situation for the SVB. One that we may see get much worse as some investors start to urge their portfolio companies to pull out from SVB.

Will this app become a ChatGPT clone or a TikTok clone? Flip a coin.

The worst fear of a top tech company is becoming obsolete. They feel they need to be constantly updating their product to keep up with the times. The most recent example of this that surfaced in the news is the new Spotify home screen announced this week that looks an awful lot like a TikTok feed.

TikTok has been sitting in a pretty sweet position as the first app to make the short video feed work at large scale. In response, every other company has been trying to get a slice of the pie. Instagram has reels. YouTube has shorts. Now, Spotify is going to have a feed that will give you the brain-melting dopamine hits that they hope will make them more money

Take this example along with the fact that every app under the sun is now trying to integrate an AI chat feature like ChatGPT and you’ll realize that most tech companies are greedy and unoriginal, just like the rest of us. The industry these days is best described as a bunch of starving feral animals (companies) scrapping over a pile of food (money).

So what does that mean for the average tech worker? Well get used to designing and building discovery feeds and integrated chats because it looks like that’ll be where companies are making money and what they’re willing to pay their employees to build.

Is the future looking bleak now that every company needs to add features that hook your eyeballs right out of your skull and keep you glued to your phone for hours? Honestly, we don’t think you should worry about it. Keep your head on straight and stay aware of market conditions and you’ll be fine.

The Silicon Valley Bank Run

Investors frantically urge companies to pull their funds

Silicon Valley Bank Tanks

Will this app become a ChatGPT clone or a TikTok clone? Flip a coin.

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