Silicon Valley Bank (SVB), a bank that focused on lending to startups in the tech sector, has collapsed, sending shockwaves through the industry it often served. According to reports, SVB was suddenly upside down on its books, which led to investors catching wind and a run on the bank followed. As a result, regulators stepped in within hours, putting the Federal Deposit Insurance Corp. (FDIC) in charge of SVB’s assets.

What Was SVB?

SVB was an unusual bank as it focused on lending to startups in the tech sector, banking around half of all US venture-backed startups. It often worked with technology companies and venture capital firms, frequently lending money to them after they had raised capital from venture capital firms. This meant working with companies that larger, more conservative banks may have been reluctant to do business with because they didn’t have the assets or cash flow necessary to underwrite a traditional corporate loan. Instead, Silicon Valley Bank would work with startups based on their ability to raise venture capital.

What Led to SVB’s Closing?

The collapse of SVB is the largest bank collapse since 2008. According to reports, SVB’s downfall was not just due to its relatively high-risk behavior, but also due to its investment strategy. SVB bought long-term bonds with the deposits it received from venture-backed companies. However, the Federal Reserve’s interest rate hikes meant that the value of these bonds was lower. As depositors fled, the bank had to recognize large losses as it sold its bond portfolio.

What Happens Next?

Regulators have put FDIC in charge of SVB’s assets. Account holders will be able to access insured money on Monday through a new entity, the Deposit Insurance National Bank of Santa Clara (DINB). However, those who had more than $250,000 in the bank, the maximum FDIC will insure, may have to wait for SVB to be liquidated to recoup their money, and potentially not all of it.

According to an FDIC news release, uninsured depositors will get a receivership certificate for the remaining amount of their uninsured deposits. “As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors,” the FDIC said in a Friday news release.

This will leave companies scrambling to find money, at least in the short term, to carry on their normal course of business. Even companies that didn’t directly bank with Silicon Valley Bank are already feeling the aftershocks of its failure. Technology companies and their employees who Silicon Valley Bank aggressively went after for their business are likely the most affected.

In Summary Silicon Valley Bank has collapsed due to its investment strategy, which involved buying long-term bonds with the deposits it received from venture-backed companies. Regulators have put FDIC in charge of SVB’s assets. Account holders will be able to access insured money on Monday through a new entity, DINB. However, those who had more than $250,000 in the bank may have to wait for SVB to be liquidated to recoup their money, and potentially not all of it. Companies that relied on SVB for their banking needs are scrambling to find money to carry on their normal course of business.