Safety trap

SVB was a new kind of big fail

Spencer Peterson

Mar 23, 2023

The bank run that dismantled SVB took place two weeks ago today.

Much has been written on it since. My prevailing thought: this was a safety trap.

Historically, bank failures have been tied to aggressive lending or scandalous securities practices. There are greedy, suited villains behind the curtain. The opposite was true for SVB.

Their errant mistake: buying US treasuries, traditionally the *safest* vehicle, less cash, on the planet.

There are many implications: Fed policy, interest rates, bank consolidation…

But another consideration: what, exactly, is safe?

Over the past 18 months, investors have rapidly fled to safety across every asset class.

In venture, that’s meant fewer investments (as startups are inherently risk-bearing) and prioritizing, generally, max-consensus companies: markets folks agree are good; products and teams folks agree are good; businesses that are already working and of scale.

This is the consensus safest place to put your venture fund’s capital… But maybe it isn’t?

For SVB — or any other bank — the safest place was objectively treasury bills. Until it wasn’t.

You never want to tell the outside world too much about your strategy as an investor, but I think this is an interesting juxtaposition.

I’m excited about companies and categories that require more squinting – and a wider leap of faith. This may actually be the safest place, after all.

Thanks for reading! Subscribe for more weekly posts on tech & investing: