Silicon Valley Bank: It’s Not A Wonderful Life

March 14, 2023



They say art imitates life, or is it life imitates art?  Either way, the collapse of Silicon Valley Bank has a lot in common with Frank Capra’s 1946 movie “It’s a Wonderful Life”. In that movie, an economic panic triggered a run on the bank, which impacted the Bailey Brothers Building and Loan. Depositors panicked and demanded to withdraw their money with the bank, similar to what just happed at Silicon Valley Bank. 


The only difference between the fictional Bailey Brothers Building and Loan and SVB is the Bailey Brothers had James Stewart jumping over the counter to calm nervous depositors using his own money and SVB had Peter Theil, the disruptive Silicon Valley venture capitalist yelling fire in a crowded theater. Two different approaches; two different outcomes. 


There was a chance to save SVB and stop the run and it was in the best interest of the venture capital (VC) community to do so. VCs and startups have been invaluable partners with SVB for forty years. When VCs had a new tech startup, it was SVB that stepped in to lend credibility to those companies when no other bank would touch them.  



Now that SVB is gone, the cozy relationship the venture community had with them might not be duplicated for years, if ever. When you have such a close symbiotic relationship with your bank, judgment and control can fall by the wayside, and that attracts government regulation. You can be sure in Washington there are already plans to prevent this situation from happening again.  I don’t think any VC in the country wanted to see SVB fail, except maybe one; Peter Theil, whose burn it all down philosophy has shaken the foundation of Silicon Valley and the halls of government.  


If you are not familiar with the name, he is the man that started PayPal. Elon Musk gets all the PR for his role in PayPal, but it was Theil who was the brains and driver behind the money transfer by email concept. Musk came to PayPal through a merger with his startup,, a couple of years after the founding of PayPal. 


It was Peter Theil that first tweeted that all startups and VCs should remove their money from SVB after SVB showed a 1.8 billion dollar loss on securities. If that tweet was not sent, SVB might not have seen a run on deposits, forcing them to liquidate assets at a loss. 


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This is not Peter Theil’s first controversial move. Theil has been a disruptive figure in Silicon Valley for years. Ultra conservative and anti-democracy, he is at odds with his contemporaries who are decidedly liberal. Theil’s contempt for institutions was on full display several years back when he famously offered $100,000 to high school students who were willing to drop out of school to start tech companies, saying college only delayed their chances of being successful entrepreneurs. 


When it came to sticking it to the government, Theil found a way to evade hundreds of millions in taxes by manipulating the Roth IRA system. Theil would deposit his acquired penny stocks from startups he funded into his Roth IRA, then when the value of those shares went up, he had tax free gains. A mere $2,000 deposit into his Roth IRA has been reportedly valued at five billion dollars, effectively making his investment profits tax free when he withdraws the money at 59. 


It was Theil that spent $10 million dollars bankrolling Hulk Hogan’s invasion of privacy lawsuit against Gawker Media that resulted in a $140 million dollar judgment against the company.  This effectively put the online media company out of business, possibly for no other reason than revenge for outing Theil as gay.


It is hard to believe that one person could have this kind of influence and power in the market to take down the 16th largest bank in the country. Maybe Theil’s call was smart business and he knew something no one else knew. One thing is for sure, the call to pull money out of SVB did some big and lasting damage to the VC and tech community. As of this writing, billions in deposits have been frozen by regulators. There is more than a good chance that everyone will eventually get everything that they had on deposit. Even if every penny is returned to the customers, the loss of the VC’s sweetheart bank is a big blow to a tight knit industry. 


SVB didn’t have to fail. Someone with a clearer head could have jumped over the counter and calmed the depositors. When the dust settles, history will recognize that the VC community has no one to blame but themselves that Silicon Valley Bank failed. 


If you are looking for a calm voice in finance, take a minute and give AeroFund Financial a call. 


-Steve Troy

CEO AeroFund Holdings, Inc.