SVB's shares had fallen more than 60 per cent when the bank said it planned to sell shares to raise capital after taking a $US1.8 billion ($2.7 billion) charge from the sale of some assets.

Its then chief executive Gregory Becker had been telling top venture capitalists in Silicon Valley to "stay calm" amid concerns about a capital crunch that wiped almost $US10 billion off the bank's market valuation.

Humphrey, the Sydney-based co-founder and chief executive of The Mintable, a startup that develops products to teach people how to become better managers, was up early breastfeeding her two-month-old son.

"I was just aimlessly scrolling my email inbox and social media when I started to see some news fluttering about SVB," she says.

"I sent a note to a couple of The Mintable investors just to understand what was happening."

About half of all venture-capital-funded startups in the United States are customers of SVB, and many of them invest in local startups in Australia, creating an interconnected web.

This tight ecosystem can see local founders who tap into funding and networks in Silicon Valley quickly thrive and reach billionaire status. Conversely, it can instantly wipe out their fortunes when the main bank that holds their cash goes under.

That was something that dawned on Humphrey in those frantic hours. 

"Our panic started to rise about the level of seriousness and the probability that the bank was actually going to collapse," Humphrey says.

She moved from the United States to Sydney with her Australian husband early in the pandemic, and in June 2021 started her business with close friend and former colleague Melissa Miller.

The business runs out of Sydney, and Denver, Colorado, where Miller is based. And the co-founders recently raised $6.8 million in funding rounds, mostly led by Blackbird Ventures, which is their main investor, and banked with SVB.

"We had approximately 80% of our funding and revenues in the SVB bank, and the remaining 20% in CommBank here in Australia," Humphrey says.

When she became aware that her funds with SVB "may or may not be available" beyond the $250,000 insured by the Federal Deposit Insurance Corporation (FDIC), she started to panic.

"Obviously, losing that money [in SVB] would be quite distressing," she says.

"The first thing that came to mind was, 'Can we make payroll for the team based in the United States,' … And then, 'How can we stay in business? How much time do we have before our capital runs out?'"

Social media frenzy feeds a global bank run:

Texts, emails and WhatsApp messages from other startup founders and venture capitalists all over the world were piling in.

"The advice was going from, 'Hey, get maybe some money out,' to like, 'Get it all out, don't be a company that loses its money,'" Humphrey recalls.

"And, you know, the reality is by the time I was up in the morning, we only had an hour to even try to transact in the States before trading hours closed."

Humphrey says the "mayhem … uncertainty and confusion" about what was happening raised her anxiety before she realised this was far bigger than one startup. 

"I kind of started to relax when I realised the enormity of the problem," she says.

"I started to think, 'Well, if this really is happening, then The Mintable is not really like the most important thing.' That this could actually take down the US economy and have a ripple effect around the globe."

Across the Pacific Ocean, in Los Angeles, California, Rory Garton-Smith, 31, and Harry Dixon, 29, were having their own panic attacks.

It was Thursday evening their time. Their anxiety was rising with every doomsday tweet and WhatsApp message signalling the imminent collapse of a bank they had come to love and thought was infallible. 

The Perth high school friends only recently entered the competitive Silicon Valley tech space.

They moved to San Francisco last year, but now work out of LA after founding Checkmate — an app that gives shoppers a dashboard of all online deals on offer and lets users keep gift cards in one place and track deliveries.

Their business is also backed by Australian venture capital fund Blackbird Ventures as well as US-based Fuel Capital, and the duo have raised $US5 million to date. About $US3 million of that money was sitting in an SVB account.

"We started getting messages like, 'It's probably fine. It's probably nothing. But just in case — if you were thinking about it — maybe wire a little bit of money out,'" Garton-Smith says.

He says SVB was supposedly a "reputable institution", but when Peter Thiel, an industry heavyweight and general partner of venture capital firm Founders Fund, said depositors with SVB should pull their money out, he took action.

"When I saw that it was from someone who was very trustworthy in the industry I thought, 'That's actually a huge, a huge red flag. We should probably act on this immediately,'" Garton-Smith says.

The founders tried to get their money out, but their bank accounts were also frozen.

Dixon says they thought because Silicon Valley Bank backed 50 per cent of the US startup market "they seemed too big to fail".

"We are an early-stage startup. We only had one bank account," Dixon says.

They started calling contacts at Morgan Stanley, JPMorgan Chase "and pretty much anyone that could take our money".

"We got set up with a NEO bank called Mercury, that is bank by First Republic Bank, at probably 5:30pm on Thursday (US time)," he says.

"We initiated the wire and thought that we'd, you know, beat everything to the punch. But we were waiting until Friday (US time) for the banks to reopen.

"We got up at the crack of dawn, refreshing the page … for hours, but no money was transferred.

"And then on Friday at about 10am (US time), we got the notification that the US government had frozen all transfers. And that's when our hearts sank."

Garton-Smith says hours before SVB's collapse, there were founders on Twitter who were virtue signalling and saying: "We won't withdraw money, we will stick around."

"And then, as soon as the bank went under, they were deleting their tweets," he says.

"It's scary when you realise how fragile things are. A bunch of group chats — people texting each other — can cripple one of the USA's top-20 largest financial institutions overnight. It's alarming."

California banking regulators shut down SVB on March 10 after a run on the lender, which had $US209 billion in assets at the end of 2022.

Depositors pulled out as much as $US42 billion on a single day, rendering the bank, which was the go-to bank for tech startups and the 16th-largest bank in America, insolvent.

It was the biggest bank failure since the global financial crisis of 2008.

SVB executives lobbied for deregulation that played part in bank's collapse

Since the global financial crisis, SVB also spent millions lobbying for the deregulatory policies that many argue ultimately created the conditions for its downfall.

In fact, its former chief executive, Becker, backed two tech industry lobbying groups that tried to influence the Dodd-Frank financial reform law.

It's another irony that is not lost on Betsey Stevenson, who served as an economic adviser under the Obama administration.

"We had [Dodd Frank] regulations put in, you know, certain stress tests, that banks needed to meet certain liquidity requirements, certain capitalisation requirements, and those were for anybody with anything that's over $US50 billion," Stevenson explains.

"And then you have the head of Silicon Valley Bank lobbying Congress to say, us small banks under $US250 billion, this is too much for us. We don't need it, we'll be OK."

Original Story By | Nassim Khadem