Without social media, the run on Silicon Valley Bank is likely to not happen. There have been runs on the banking industry before, but the SVB debacle was a new technology-fueled phenomenon that shocked the industry, regulators and most other experts.
Twitter fuels run on Silicon Valley bank
Twitter stokes panic
Anxiety in the tech world escalated quickly through social media, mostly Twitter, last week. “SVB” (Silicon Valley Bank) was mentioned about 200,000 times on Twitter last Thursday, with the founders and CEOs of several tech companies posting about withdrawing money from the bank. These outstanding figures in the technology field are the old customers of Silicon Valley Bank for many years, but they have fallen into trouble.
“Well, I’ve heard from dozens of founders how to deal with the Silicon Valley banking crisis, and it’s going to be an all-out bank run,” Howard Lerman, founder of technology startup Yext, said last week. Four tweeted that at the time Silicon Valley Bank was trying to raise fresh capital.
“The reason for a bank run is that there is no benefit to keeping money in a bank that is at risk,” Xavier Helgesen, founder of venture capital firm Enduring Ventures, wrote the same day.
By Friday, depositors had attempted to withdraw $42 billion in deposits from Silicon Valley Bank. The bank was shut down by regulators and taken over by the FDIC.
No bank has ever failed before so fast.
“The crisis and the rapid development of social media tell us that technology is making the existing regulatory structures built in the 1930s obsolete,” he said. “In a tech-savvy environment, the whole system needs to be looked at differently.”
During the S&L crisis, a “loss of confidence” led to a “panic” among depositors, but it spread over weeks, not hours. That helped regulators and government workers calm the panic and work aggressively to stop the run, Vartanian recalls.
“When we shut down savings and loan banks to prevent runs, we used to have the banks stack cash in the teller windows so people could see it, to ease people’s psychological concerns. One thing that happened a lot was that people saw the teller There is still a queue to get the money out, but they put it back right away. The psychological element of having the money in their hands calms them down,” Vartanian said.
News on twitter sparks panic
But he added that this stop-gap measure no longer appears to be feasible today because “information is so instantaneous now that disinformation can spread in an instant”.
Ironically, the investors and founders with the greatest exposure to SVB were the very same people who quickly stoked the panic that ultimately led to SVB’s collapse. “Our industry shot itself in the foot,” says venture capitalist Mark Suster. His call for calm last Thursday was largely ignored.
Delete inflammatory tweets
Siqui Chen, founder and CEO of financial software startup Runway, deleted some of his tweets about SVB and admitted on Monday that “fomenting a bank run sucks for everyone, and I don’t want to be a pushover.” .
However, it’s a little late.
Grant Brooke was another founder who deleted a tweet about SVB last Thursday, though he did not explain why. One of his deleted tweets read: “At this moment, SVB has a few hours to arrange an acquisition. As a founder, it is your responsibility to limit your exposure for your employees and investors.” He said in another deleted tweet “As probably one of the few founders who have experienced a modern day bank run, get your money out now. They have to say all is well. If you don’t have another bank account, just Deposit funds in non-Silicon Valley bank accounts of your investors.”
Some tech moguls with accounts at Silicon Valley Bank even deleted their tweets in support of the bank. Jason Lemkin, a prominent venture capitalist and advisor, tweeted last Thursday: “Keep our $13 million in Silicon Valley Bank. That’s it.” The article was deleted, and he responded to CNBC saying: “I was wrong.”
Meanwhile, tech founders turned investors Jason Calcanis and David Sacks have been tweeting about SVB since last Thursday. By Friday, Calcanis called the Silicon Valley Bank’s situation “alert one” and the need for a bailout.
“Next Monday, 100,000 Americans will be lining up at their area banks to get their money, and most won’t get it,” Calcanis wrote in a tweet, calling March 13 “Monday Bloody Monday”.
Calcanis says most people don’t get money
On Sunday, Vivek Ramaswamy, an entrepreneur and conservative activist, noted that VCs and some founders appeared to be “going out of their way to spread the word that there’s going to be a bank run on Monday.” As a result, he drew an angry response from Sachs.
“Fake populist psychopath who simultaneously opposes responsible measures to prevent a banking crisis while also preannounced his plan to blame the ensuing chaos on those of us who were trying to avoid it. Get this guy out of the Oval Office The farther the better,” Sacks wrote.
Take Social Media Seriously
Sachs’ tweet was also deleted. Yet attempts to rewrite the scare of the past four days continued.
Chen, who deleted an earlier tweet about SVB, tweeted again on Monday that Calcanis and Sachs’ warning was actually to “prevent a massive bank run for which they knew they would be blamed.” “.
Matt Ocko, co-founder of CVC, a Silicon Valley venture capital firm, agrees that without creating “publicity and a sense of urgency” on or through social media, “the people in power have probably been sleeping and screwed up.” nation.”
How another bank will avoid the same fate as SVB in the future is unclear. One founder’s suggestion is that banks take social media more seriously. “The same types of tactics that can be used to rig elections can also be used to weaken banks,” he said.
But for the defunct Silicon Valley Bank, its Twitter account has been completely deleted.