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The Big Take

SVB’s Failure Exposes Lurking Systemic Risk of Tech’s Money Machine

Many private equity and venture capital firms found themselves facing the same counterparty risk, creating a frenetic weekend before federal intervention.

The Silicon Valley Bank office in New York. SVB was the bank of choice for startups backed by the region’s most prominent venture firms.

The Silicon Valley Bank office in New York. SVB was the bank of choice for startups backed by the region’s most prominent venture firms.

Photographer: Yuki Iwamura/Bloomberg
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The collapse of Silicon Valley Bank has prompted a global reckoning at venture capital and private equity firms, which found themselves suddenly exposed all together to the tech industry’s money machine.

SVB billed itself as a one-stop shop for tech visionaries — more than just a bank, a financial partner across loans, currency management, even personal mortgages. Its tactics to bundle client services were deemed aggressive by some, but it was hard to argue with the results: business with 44% of venture-backed technology and health-care companies that went public last year, and overall explosive growth during boom times.