Who’s To Blame for the Silicon Valley Bank Mess? The Internet Investigates

Lon Harris
Lon Harris is a contributor to dot.LA. His work has also appeared on ScreenJunkies, RottenTomatoes and Inside Streaming.
Who’s To Blame for the Silicon Valley Bank Mess? The Internet Investigates
Evan Xie

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Since the collapse of SVB, federal regulators have guaranteed that SVB depositors won’t suffer any losses. For now, it seems the immediate threat of contagion has passed, as regional bank stocks started to rebound following a Monday sell-off. As Silicon Valley Bank announced its new name, Silicon Valley Bridge Bank, and FDIC-appointed president Tim Mayopoulos urged former customers to consider returning with at least some of their funds, the media and technology pundits have started to refocus their attention elsewhere.

There’s naturally a whole active debate about whether or not the federal government’s intervention in SVB technically meets the definition of a “bailout.” But the real post-SVB fallout discussion, at least so far, has pivoted to, who specifically is to blame for SVB’s downfall? A number of potential suspects have been identified and held up for scorn and ridicule.


Suspect #1: The Bank Itself

Many fingers are pointing back to SVB itself and the bank’s core business model. By design, the bank served corporate deposits as opposed to retail customers. With more of its total deposits in the hands of fewer customers – and with many of those customers listening to the same venture capitalists, thought-leaders and prominent investors – it’s easier to trigger a run than at a more conventional bank. One former SVB employee, speaking anonymously with CNN, theorized that the bank’s public acknowledgment of its dire financial situation, prior to having a solid strategy to save deposits, was the killing blow.

The bank’s strategy proved particularly risky in the current economic landscape. A post-pandemic startup boom left SVB flush with cash; with deposits up 86% in 2021, it was bringing in money faster than it could lend it out. Their solution was to put the bulk of the funds into Treasuries and 30-year mortgages. Now in 2023, with interest rates at a 15-year high in an effort to tamp down inflation, and venture capital drying up amid recession fears, deposits fell just as SVB’s assets also tumbled in value. This dire combination then led to panic among investors.

Famed investor Michael Burry – he’s the guy played by Christian Bale in “The Big Short” – blasted SVB on Sunday for taking “stupid risks” based on “hubris and greed.” The bank has already been hit by a shareholder securities-fraud lawsuit, accusing management of failing to warn customers about its risky business model.

Suspect #2: The Government

And though President Biden noted in his remarks that the bank’s management will lose their jobs, Democrats have perhaps unsurprisingly singled out former President Trump as the chief culprit. Many on the left are pointing to Trump’s deregulation of the banking industry that was lobbied for, in large part, by former SVB CEO Becker. The former president, backed by Republican majorities in Congress (along with several aisle-jumping Dems), passed a new law in 2018 allowing mid-sized banks like SVB to avoid some of the regulations that were put in place following the ‘08 financial crisis. Had this law not passed, SVB would have been subjected to stricter oversight and more regulations that might have slowed or prevented its implosion. Biden called on Congress to strengthen the banking regulations and roll back some of the 2018 changes to the law.

Despite the regulatory rollback, other pundits and officials are nonetheless still blaming federal regulators and noting that there was ample time to alert the public to the dangers of SVB’s investment plans. Former Treasury official and economist Aaron Klein explained on “Meet the Press” on Sunday that the Fed had given SVB “a clean bill of health,” failing to protect their customers.

Suspect #3: Crypto

But these accusations are really just the beginning of the finger-pointing, as just about every stakeholder in tech, the media, and the economy sound off this week about who they think is to blame. Crypto advocates blamed inherent flaws in centralized banking and fiat currency more generally, while others pointed to the collapse of the crypto market and the FTX exchange as setting the stage for the SVB crisis.

Suspect #4: The Media

Reporters were accused of overhyping the story, or getting caught up in predictions about what might happen rather than “sticking to the facts.” Social media also took some abuse in the aftermath of SVB’s fall. Twitter wasn’t yet a concern during the last financial crisis; the argument goes that panicky all-caps tweets helped to set the stage for a physical bank run in the real world.

Suspect #5: Wokeness

Meanwhile, right-wing firebrands and Wall Street Journal columnists went after their favorite scapegoats: Obama and the abstract concept of “wokeness.” In WSJ, Andy Kessler cited a 2022 proxy statement from SVB noting that its board was made up of 45% women, along with two veterans and members of the Black and LGBTQ+ communities, arguing that the bank was apparently “distracted by diversity demands.” On his Fox News show, Carlson blamed the Obama administration, which made bank management “increasingly incompetent” by imposing “diversity, equity and inclusion standards” on the financial industry.

Suspect #6: Venture Capital

According to Business Insider, some venture capitalists are even blaming one another for stoking the fears that ultimately led to SVB’s collapse. Upfront Ventures managing partner Mark Suster compared feverish VC and investor tweets warning about trouble last week to the classic example of patrons shouting “fire” in a movie theater. Others disagreed; as one VC firm leader told Forbes, “you don’t blame the customer for taking money out of the bank.”

Obviously, identifying the key issues that led to the SVB collapse matters, as it helps everyone to avoid the same pitfalls next time with the next bank. Still, the next few steps seem relatively clear: protect SVB depositors in the short-term, restore some of the post-2008 crisis regulations that might’ve helped prevent a full-blown crisis, and maybe exercise a bit more caution before tweeting that the levees have broken and it’s time to head for high ground. With that in mind, it’s hard not to see at least some of the finger-pointing not as constructive criticism but everyone’s favorite form of emergency PR: crisis management. What we potentially have here is a large group of people who feel implicated, and thus want to suggest that the problems all started with someone, anyone, else.

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🏰 Disney's Epic Investment Stands Out Amidst Gaming Industry Layoffs

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

🔦 Spotlight

In the midst of widespread gaming industry layoffs, a glimmer of positive news emerges as Disney announces a significant move: a $1.5 billion investment in Epic Games. 🏰💰🐭

Image Source: Disney

Disney's $1.5 billion investment in Epic Games, disclosed late Wednesday, signals a strategic alignment aimed at expanding the success of "Fortnite." The deal enhances Epic's growth prospects after financial setbacks, including layoffs, and strengthens the partnership between the two companies. With Disney gaining a larger equity stake in Epic, the collaboration will broaden the integration of beloved Disney franchises like Marvel, Star Wars, Pixar, and Avatar into the game, potentially boosting its appeal and longevity. This significant investment underscores Disney's commitment to interactive entertainment and signifies a shift towards games as a primary revenue stream, aligning with the growing trend of digital engagement among younger demographics. Moreover, the potential for crossover sales of physical Disney products within "Fortnite" and the exploration of new content distribution channels are just some of the opportunities arising from this partnership.

For LA tech, the Disney-Epic Games partnership represents a validation of the region's burgeoning tech and gaming ecosystem. The substantial investment in Epic, who maintains a large Los Angeles office with 1,000+ employees (according to LinkedIn), reflects confidence in the LA’s talent pool and innovation potential. Additionally, this partnership between two industry giants fosters an environment for further collaboration, investment, and growth within LA's tech sector. As Disney and Epic Games deepen their ties and explore new avenues for content integration and distribution, it not only elevates the prominence of LA as a tech hub but also stimulates economic growth and job creation in the region. This partnership highlights LA's unique position as a hub where technology and entertainment converge. With its ability to integrate diverse industries, LA is driving innovation and expansion in digital entertainment. 🚀💸🎮

🤝 Venture Deals

LA Companies

  • ProducePay, a financing and marketplace platform for the fresh produce market, raised a $38M Series D led by Syngenta Group Ventures joined by Commonfund, Highgate Private Equity, G2 Venture Partners, Anterra Capital, Astanor Ventures, Endeavor8, Avenue Venture Opportunities, Avenue Sustainable Solutions, and Red Bear Angels. - learn more
  • Blush, an invite-only dating app that drives users to local businesses on dates, raised a $7M Seed Round from individuals like Naval Ravikant. - learn more
  • Mogul, a startup founded last year that provides an overview of an artist's royalty earnings and identifies areas where money is owed but has not yet been collected, raised a $1.9 million seed round from Wonder Ventures, United Talent Agency, AmplifyLA, and Creator Partners. - learn more
  • Avnos, a hybrid direct air capture startup, raised a $36M Series A led by NextEra Energy and joined by Safran Corporate Ventures, Shell Ventures, Envisioning Partners, and Rusheen Capital Management. - learn more
  • AI.fashion, startup whose mission is to help retailers enhance the online shopping experience by providing consumers with virtual try-ons and personalized fashion recommendations, raised a $3.6M Seed Round led by Neo. - learn more
  • Suma Wealth, startup that aims to demystify financial topics and provide culturally relevant content, virtual experiences, and resources to help Latino users navigate financial challenges and opportunities, raised a $2.2M Seed Round . Radicle Impact led, and was joined by Vamos Ventures, OVO fund and the American Heart Association Impact Fund. - learn more
  • 222, a startup that helps users discover their city and meet new people through unique social experiences, raised a $2.5M Seed Round. Investors included 1517 Fund, General Catalyst, Best Nights VC, Scrum Ventures, and Upfront Ventures. - learn more
  • LimaCharlie, a security operations cloud platform, raised a $10.2M Series A led by Sands Capital. - learn more
  • Polycam, an app that uses a smartphone’s sensors to capture 3D scans of objects, raised an $18M Series A co-led by Left Lane Capital and Adjacent, and joined by Adobe Ventures and individuals like Chad Hurley and Shaun Maguire. -learn more.

LA Venture Funds

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a startup building software to decarbonize logistics for logistics businesses and goods business through a vetted marketplace and optimization software. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $1.5M Pre Seed Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

Venture Waves, Climate Tech Wins, and Silicon Beach's Ongoing Evolution

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Anduril Seeks $1.5B in VC Funds

Defense company Anduril Industries Inc., based in Costa Mesa and founded by Palmer Luckey, is seeking to raise $1.5 billion in fresh funds to boost its valuation to $12.5 billion or more, according to sources quoted by The Information. This fundraising effort, if successful, would mark one of the largest venture capital rounds of the year.

Image Source: Anduril

Anduril recently secured a contract to develop and test small unmanned fighter jet prototypes under the Air Force’s Collaborative Combat Aircraft (CCA) program, beating out major defense companies like Boeing, Lockheed Martin, and Northrop Grumman. Alongside General Atomics, Anduril will design, manufacture, and test these aircraft, with a final multibillion-dollar production decision expected in fiscal year 2026. This program aims to deliver at least 1,000 combat aircraft to fly in concert with manned platforms and is part of the Air Force’s Next Generation Air Dominance initiative. Central to Anduril’s success in this contract is the Fury autonomous air vehicle, acquired through the purchase of Blue Force Technologies. This victory underscores Anduril's rapid advancement in the defense sector, aligning with Luckey's vision of building faster and more cost-effective defense assets. - learn more

Los Angeles Ranks Number 1 in Emerging Climate Tech Hub

The 2024 Emerging Climate Tech Hubs Report by Revolution highlights Los Angeles as a burgeoning center for climate tech innovation. LA's growth in this sector is driven by its diverse talent pool, strong research institutions, and a culture of environmental consciousness. The city's unique mix of legacy industries, such as entertainment and aerospace, alongside emerging tech companies, positions it as a pivotal player in the climate tech landscape. This shift reflects a broader trend of decentralized climate tech funding across the U.S., reducing the historical dominance of California's traditional hubs. - learn more

Silicon Beach: Looking Back, Moving Forward

Assessing the overall health of the startup market is challenging, especially as venture capital funding has decreased by an average of 61% from 2021 to 2023 across the top VC markets in the US. Markets with robust ecosystems in AI, SaaS, Biotech, Healthtech, and Fintech appear to be weathering the downturn better than those focused on Consumer and Gaming industries, areas where Los Angeles traditionally excels.

Percent Change In VC Funding By Region

CB Insights

LA Times paints a rather bleak outlook on the Los Angeles tech scene noting venture capital funding in Greater Los Angeles plummeted 73% from 2021 to 2022. Silicon Beach, once a vibrant tech corridor, currently faces high vacancy rates and lacks late-stage financiers, especially in the AI sector. However, there are positive signs, including growth in aerospace startups and increased venture capital investment in early 2024, suggesting a potential rebound for LA's tech ecosystem.

While LA may not be exceeding expectations during this period, its tech ecosystem warrants a nuanced evaluation, given the broader market dynamics and its strong performance in specific sectors. Reach out to us with your thoughts.

🚀 SpaceX gears up for another stellar year, active raises, and more

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Happy Friday Los Angeles! You made it through the first week of 2024!

🔦 Spotlight

Elon Musk may be a divisive (albeit entertaining) figure, but the continued success of SpaceX is pivotal for the aerospace industry in Los Angeles and more broadly around the world.

Image Source: SpaceX webcast

What happened with SpaceX in 2023?

  • Elon Musk challenged Facebook founder, Mark Zuckerberg to a cage fight.
  • SpaceX launched 96 successful missions with its Falcon series of rockets, a 57% increase over its previous annual record.
  • SpaceX conducted two test flights of the largest and most powerful rocket ever built, Starship.
  • Roughly two-thirds of SpaceX's launches in 2023 were devoted to building out Starlink, the company's satellite-internet megaconstellation.
  • Isaacson’s Elon Musk biography was published in September including everything from Musk’s tumultuous relationship with his father to his work ethic and “demon mode”.

Moving forward what can we expect from SpaceX and its controversial founder? Continued innovation pushing the aerospace industry to new limits? Yes. More drama? Without a doubt.

Here is some of what is to come in 2024:

🤝 Venture Deals

Just Announced

Check back next week!

LA Exits

  • CG Oncology, an Irvine, CA-based developer of immunotherapies for bladder cancer, filed for a $100M IPO. It plans to list on the Nasdaq (CGON) with Morgan Stanley as left lead underwriter, and has raised around $317m in VC funding. - learn more
  • McNally Capital agreed to sell Advanced Micro Instruments, a Costa Mesa, CA-based maker of gas analyzers and sensing technologies, to Enpro (NYSE: NPO). - learn more

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a hard-tech startup that is developing a technology for decarbonizing natural gas, is raising a $1.5M Seed Round. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $250K Angel Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

📅 LA Tech Calendar

Sunday, January 7th

Wednesday, January 10th

  • Startup Cafe: Networking with a Kick - Entrepreneurs, Startups, and Tech Enthusiasts join together to meet and connect with like-minded people, industry professionals and investors, while enjoying a nice cup of coffee in Venice at The KINN. This week’s interactive discussion about AI’s evolution in entertainment will feature Dr. Sam Khoze and Rachel Joy Victor.
  • Venice Tech Happy Hour- Join Startup Coil and FoundrHaus Wednesday evening and enjoy the sunset from the rooftop, grab a bite overlooking Abbot Kinney, and mingle with other tech enthusiasts and entrepreneurs by the bar on the patio.

Have an awesome event coming up? Reach out to be featured on next week’s Newsletter!

📙 What We’re Reading

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