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- The collapse of Silicon Valley Bank has sent shockwaves through the tech industry.
- In the fallout, a blame game has ensued among venture capitalists.
- While some call out social media frenzy, others place responsibility squarely on the shoulders of SVB execs.
The venture capital community has resorted to finger-pointing in the fallout of Silicon Valley Bank's implosion that jolted the tech industry.
The failure of Silicon Valley Bank sent startup founders reeling on Friday as many lost access to their funds. A bank run of $42 billion in withdrawals — roughly 25% of the bank's $161 billion in deposits — meant regulators had to shut down Silicon Valley's once beloved bank.
Some say SVB executives are on the hook for its fall, after spending the last few years in an "exposed position," Jamie Montgomery, co-founder and managing partner of March Capital, told Insider on Friday. However, others are placing the blame elsewhere.
In the wake of the abrupt collapse, venture capitalists are blaming each other for playing a role in the largest bank failure since the 2008 financial crisis. Many say their fellow VCs incited unnecessary panic online that ended SVB's decades-long run.
Although SVB CEO Greg Becker tried to calm top venture capitalists in a Thursday phone call, he conceded that the bank would only be in trouble if "everyone is telling each other SVB is in trouble." Ultimately, that's exactly what happened, Mark Suster, a manager partner at Upfront Ventures, told Insider on Friday.
"If you are in a movie theater and it's not on fire and you yell fire, and then you congratulate yourself for being out first while other people are laying on the floor, do you sleep well tonight?" Suster asked.
"The problem is that we're in a state of social media where everyone is hearing at the same time, 'Oh my God, this bank's going down," he told Insider.
The whispers of "liquidity issues" reportedly began in December 2022 as founders started quietly switching banks, and panic only continued to rise online in the months leading up to SVB's collapse.
Madison Maxey, the CEO and founder of Loomia and account holder at SVB, also expressed disappointment for the panic around the bank prior to the shutdown.
"This emergency was not helped by investors going into a frenzy and orchestrating a bank run," she told Insider. "If the investor community thought it was beneficial to keep an institution alive over an individualized goal of protecting only their own companies, I would like to think that we could have avoided the largest bank closure since 2008."
However, leaders of the VC firms who advised startups to withdraw their money from SVB told Forbes the blame for the bank's fate doesn't fall on them.
"It's the company's job to convince the market that there shouldn't be a panic. SVB completely fucked this up. They decided to take all these losses without a financing solution in place, and now they're blaming the market," one firm leader said, according to Forbes.
They added: "You don't blame the consumer for taking money out of the bank."