The world watched in horror last week as the Silicon Valley Bank collapsed. The high-profile, California-based financial institution that served nearly half of all venture-backed tech startups was seized by its regulator, the California Department of Financial Protection and Innovation (DFPI). Since then, experts and industry pundits have dissected the developing situation to share their post-mortem findings of the bank’s demise, which included a bank run precipitated by a decline in start-up funding, rising interest rates, and the bank’s sale of government bonds at a huge loss to raise capital.
In addition, SVB’s management team demonstrated an inability to assess obvious signs and developing trends in the market, poor risk management, and reckless management of customers’ cash needs, which inevitably accelerated the bank’s demise. One recent opinion piece in the Wall Street Journal alluded that the bank’s commitments to diversity and environmentally and socially conscious investments, as well as the composition of the management team, was a reason for its collapse. The ‘diversity distraction,’ the author indicated, could have contributed to the poor decision-making and eventual collapse of the bank.
