C Tech, Mar.12, 2023
“Poor communication, unfortunate choice of words, and an unusual dependence on a handful of clients resulted in the bank becoming a persona non grata.”
The story of the dramatic collapse of Silicon Valley Bank (SVB) should greatly alarm Israel. Not necessarily because of the expected damage to the high-tech industry, but rather as a glimpse of a much broader possible future scenario. The fall of the bank illustrates the centrality and power of psychology in the financial world and the speed with which trust built up over decades can be lost.
SVB is a bit like Israel: an unprecedented economic success that was built from nothing entirely on the high-tech vision and its realization. Just as the high-tech industry began to develop in Israel in the 1980s, the bank was also established in 1983 when it recognized the lack of solutions the traditional banking system had for the first startups.
The success was quick because of the identification of the unique niche and already in 1988 the bank was listed on Nasdaq and since then its fate was tied to it. In the crisis of 2000, it was hit and its stock plummeted. But it was precisely in 2008 that it recognized the opportunity in Israel, which was then an island of stability in the turbulent world of the financial crisis, and SVB opened its first branch outside the U.S. here. SVB has become synonymous with the high-tech world just as Israel has with high-tech success in recent decades. Every investor knew that they had to be in Israel, and yes, they always also had an account at SVB.
The boom of the pandemic and the months that followed were one of the best periods of business in the history of SVB, which tripled its assets and, accordingly, its stock also jumped by hundreds of percent. The timing of SVB’s collapse is also nothing less than symbolic for Israel, because like the bank’s management, the leadership in Israel is also currently busy convincing the world that everything is fine with us. In the case of the bank, it ended badly, because the more it tried to convince the outside world that there was no danger, the more anxious and fearful investors and account holders grew. … Source