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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Big Wins: Dodgers Take the Title ⚾, ChatGPT Levels Up🚀

🔦 Spotlight

Happy Friday, LA! It’s been a week of big wins, on and off the field. 🎉

⚾️ First up, let’s talk Dodgers. With a thrilling 7-6 comeback victory over the Yankees in Game 5, the Dodgers clinched their eighth World Series title, their first since 2020. The city is buzzing, and fans are ready to celebrate! A parade kicks off this morning at 11 a.m., starting at City Hall and winding down to Flower Street, with a ticketed celebration at Dodger Stadium for those wanting to keep the festivities going.

Image Source: Dodgers

💻 Meanwhile, in the tech, OpenAI just rolled out a game-changing update for ChatGPT. Plus and Enterprise users can now access real-time internet search, powered by Microsoft Bing, bringing ChatGPT's responses fully up-to-date. This means users can now ask about the latest news, hotspots, or recent LA startup announcements, and ChatGPT will pull in fresh, relevant answers directly from the web. Previously limited to information up to 2021, ChatGPT’s new browsing capabilities make it a valuable digital assistant for anyone needing real-time insights in fast-paced industries like tech and entertainment.

Image Source: ChatGPT

🔍 The real-time search feature also includes “Browse with Bing,” allowing ChatGPT to source information from multiple sites for detailed answers to complex questions. Whether you’re exploring the latest venture capital trends in LA or curious about the best local spots, ChatGPT’s new browsing power helps you stay ahead with the latest info. This leap forward in AI functionality makes ChatGPT even more versatile and powerful for everyone, from business owners to everyday users.

From the Dodgers’ World Series win to OpenAI’s latest ChatGPT update, there’s a lot to celebrate in LA this week. Here’s to champions, innovation, and a city that’s always pushing boundaries. 🌆✨


🤝 Venture Deals

LA Companies

  • Final Boss Sour, a Los Angeles-based gaming-themed snack company specializing in healthier sour snacks, has raised a $3M Seed funding round led by Science Inc. to expand its product offerings and operational capabilities. - learn more
LA Venture Funds
  • Smash Capital led a $50M Series B round for Read AI, a productivity-focused AI company, bringing its total funding to $81M. The company offers a platform that enhances meeting efficiency through features like note-taking, summarization, and transcription. Additionally, Read AI introduced "Read AI for Gmail," a free Chrome extension that integrates information from various applications, reducing the need to switch between apps. The funds will be used to increase the company's headcount in engineering, data science, and business teams. - learn more
  • Distributed Global participated in a $25M funding round for Nillion, a company that provides decentralized privacy solutions designed to secure sensitive data using advanced technologies like secure multi-party computation. - learn more
  • Act One Ventures participated in a $5M Seed funding round for Latii, a construction materials supply chain startup, to enhance its platform that connects contractors with suppliers, aiming to streamline procurement processes and reduce costs in the construction industry. - learn more
  • SmartGateVC participated in a pre-seed funding round for Ritual Dental, a company revolutionizing dental care by integrating advanced technology and microbiome science to provide personalized, preventive treatments. - learn more

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      Billion-Dollar Milestones and Snapchat’s New Features

      🔦 Spotlight

      Happy Friday Los Angeles!

      This week’s spotlight showcases LA’s thriving tech scene, featuring Snapchat’s latest feature updates and two local startups Liquid Death and Altruist, making TechCrunch’s Unicorn List for 2024.

      Image Source: Snap

      Snapchat’s recent fall updates bring fresh features, including a new iPhone camera shortcut for instant snaps, Halloween-inspired AI-powered Lenses, and Bitmoji costumes inspired by Mean Girls and Yellowstone. Bitmoji stickers now reflect trending Gen-Z expressions like “slay” and heart symbols for added flair in chats. Plus, the “Footsteps” feature on Snap Map allows users to track their past adventures privately, adding a nostalgic touch.

      Image Source: Liquid Death

      ICYMI, two LA startups joined the Unicorn Club—achieving valuations over $1 billion. Liquid Death, based in Santa Monica, is a canned water company with edgy branding and a humorous sustainability focus. Known for viral marketing and brand partnerships, it redefines bottled water as a lifestyle brand and environmental statement. In March, Liquid Death closed $67 million in strategic financing, raising its total funding to over $267 million and valuing it at $1.4 billion.

      Image Source: Altruist

      Altruist, a Culver City-based fintech platform, offers financial advisors streamlined tools to better serve their clients. With a user-friendly investment and account management platform, Altruist has gained strong traction in the finance world. In May, it announced a $169 million Series E funding round, bringing its total funding to over $449 million and earning a valuation of $1.5 billion.

      Together, Liquid Death and Altruist exemplify LA’s capacity for innovation across diverse sectors, from lifestyle branding to fintech. Whether reshaping financial tools or redefining sustainable branding, these companies showcase LA’s unique entrepreneurial spirit. Go LA!

      Check out TechCrunch’s 2024 Unicorn List here. And don’t miss Snapchat’s latest features—perfect for adding some fun, connection and maybe a few selfies this weekend!


      🤝 Venture Deals

      LA Companies

      • Freeform, a company bringing AI to metal 3D printing, raised $14M in funding from NVIDIA’s NVentures and AE Ventures to further develop its AI-powered 3D printing technology for industrial-scale production. - learn more
      LA Venture Funds
      • Anthos Capital participated in a $70M Series D round for Carbon Robotics, which develops AI-powered robotics for precision agriculture, and the funding will be used to accelerate the growth of its autonomous weeding technology. - learn more
      • Anthos Capital participated in a $3.5M seed round for Plasma Network, aimed at expanding access to USDT stablecoins on the Bitcoin network, with the investment supporting the network’s growth and efforts to enhance stablecoin accessibility through the Lightning Network. - learn more

      LA Exits


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          ⚖️FTC’s "Click to Cancel" Rule and Its Ripple Effect on Tech

          🔦 Spotlight

          Happy Friday Los Angeles,

          The FTC’s new “Click to Cancel” rule is shaking up subscription-based tech. Now, instead of navigating a maze of cancellation hurdles, users can cancel subscriptions as easily as they signed up—with a single click. This shift is a wake-up call for SaaS, streaming, and app-based companies, where once-hidden exit options often kept users around simply because canceling was a hassle.

          The rule also requires businesses to send regular renewal reminders, ensuring customers stay informed about upcoming charges. It's more than a cancellation button—it’s about transparency and giving users control over their decisions.

          For startups, the impact goes deeper than UX adjustments. Many have relied on "dark patterns," which subtly discourage cancellations by hiding the exit. Now, companies must shift toward building genuine loyalty by delivering real value, not by complicating exits.

          While this might affect retention rates initially, it could lead to more sustainable business models that rely on satisfaction-driven loyalty. Investors may start prioritizing companies that emphasize transparent, long-term engagement over those that depend on dark patterns to maintain retention metrics.

          The rule opens the door to more ethical UX design and a truly user-centered approach across the tech industry. It may even set a precedent against manipulative design in other areas, such as privacy settings or payment methods.

          Ultimately, the “Click to Cancel” rule presents an opportunity for the tech industry to foster trust and build stronger customer relationships. Startups and established companies that embrace transparency will likely stand out as leaders in a new era of customer-centric tech, where trust—not tricky design—is what retains users.

          As the tech landscape continues to evolve, LA Tech Week 2024 offers a chance to explore these shifts in real-time. Check out the upcoming event lineups to stay informed and make the most of your time:

          For updates or more event information, visit the official Tech Week calendar.


          🤝 Venture Deals

          LA Companies

          • Ghost, a company supporting top brands and retailers with streamlined logistics and fulfillment solutions, raised a $40M Series C funding round led by L Catterton to fuel its continued growth and innovation. - learn more

          LA Venture Funds
          • Assembly Ventures participated in a $27M Series A round for Monogoto, a provider of software-defined connectivity solutions that enable secure, cloud-based IoT and cellular network management on a global scale. - learn more
          • Angeleno Group participated in a $32M Series C round for REsurety, a company that recently launched an innovative clean energy marketplace aimed at providing better financial and operational insights to support renewable energy transactions. - learn more

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