There is a simple answer and a complex answer to why the bank failed. The simple answer is that it experienced bank run and didn’t have the money on hand to cover withdrawals. A bank run is when many depositors withdraw their funds at the same time. When the bank couldn’t produce the funds to cover withdrawals, regulators stepped in and closed the bank.nnThe complex answer takes a wider and more complicated view as to why SVB was unprepared for a bank run. Ever since the financial crisis of 2008, interest rates have remained low. For a time, Federal Reserve chair Jerome Powell, set a zero-interest rate policy (ZIRP).nnWhile interest rates were zero percent, the startups and tech firms that were SVB’s main customers experienced periods of significant cash intake. SVBs bank deposits grew as IPOs, SPACs, and VC investment exploded at a rapid pace.nnHowever, this meant that the bank’s customers didn’t need loans or financing – and loans are how banks make money. In the simplest terms, a bank takes deposits and issues loans, and makes profit from loan interest. But with fewer clients needing loans and all this cash on hand from deposits, SVB needed other ways to make money.nnSo, it began to purchase long-term government securities. The problem with this method is that if interest rates went up, those securities lost value. Instead of being able to make money with credit risks, like loans, SVB turned to interest risks with securities. When the Fed began hiking interest rates to curb inflation, SVB’s security holdings began to decrease in value.nnAnother impact of interest rate hikes was the VC firms stopped tossing money at tech startups as freely. Many of these businesses then needed to dip into their own pocket by accessing their funds deposited with the bank.nnSVB moved to quickly free up liquidity to cover what customers were taking out. It sold $21 billion worth of securities, causing a $1.8 billion loss after taxes. It also announced a plan to shore itself up by selling $2.2 billion in shares, triggering Moody’s to downgrade its credit rating.nnWhen SVB presented its slide decking explaining the situation on March 8, 2013, customers began exiting en masse. Peter Thiel’s Founder’s Fund advised its portfolio customers to pull out. Other VC firms, like Union Square Ventures and Coatue Management, told their companies to pull out as well.nnThe bank run happened in less than two days. The largely digital platform allowed customers to pull their funds out electronically, and SVB didn’t have a chance to intervene or quell the panic. On March 9, 2023, customers attempted to withdraw $42 billion – nearly a quarter of the bank’s deposit holdings. The share sale was canceled and SVB attempted to sell itself.nnBy Friday March 10, 2023, regulators stepped in, and the bank closed.