Silicon Valley Bank - the Failed Link Between Tech, Wine and Money

In the second largest bank failure in US history, the California-based Silicon Valley Bank went into receivership last week as a result of inadequate liquidity and insolvency. The bank was closely involved with both the tech start up and wine sectors and sometimes brought them together. Robert Joseph reports.

Reading time: 7m

Start-up inventions and vineyards
Start-up inventions and vineyards

Until news of its collapse broke last week, few people outside the US had heard of Silicon Valley Bank, that country’s 16th largest bank. In North America, too, its name rang the loudest bells in its home state of California and, most specially, in the world of tech start-ups with which the Silicon Valley is synonymous.

Bank for the tech start-ups

As Bloomberg put it “What was Silicon Valley Bank to the world of startups and venture capital? Practically everything.” For The Information, it was “a central artery in the venture capital circulatory system… While other banks that routinely handled huge clients might barely give a start-up founder the time of day, SVB showered them with attention.” In the US, the bank was closely associated with companies focusing on innovations to fight climate change, while its far smaller UK subsidiary was considered crucial to Britain’s tech sector.

The bank for the wine industry

Less widely noticed, until now, was the role SVB has held in the US wine industry. It is no exaggeration to say that the bank’s wine division led, very publicly, by Rob McMillan its founder and executive vice president, has been a central pillar of the California, Washington and Oregon  wine world. Far more wineries may borrow from American Ag Credit (Farm Credit), but SVB has lent over $4bn to the industry since 1994. The current figure is around $1bn which have gone to an estimated 450 clients.

Important Source of information

A substantially larger number of wineries and grape-growers bank with SVB, however, and, every year, hundreds have contributed data to McMillan’s highly respected State of the Wine Industry Report and the conference that marked its annual publication. Besides this invaluable document, McMillan has also become a trusted source of up-to-date information about the US wine market as a whole. His Peer Group Analysis of 100 financial statements, for example was an essential measure of the evolution of DTC – Direct-to-Consumer distribution.

As Esther Mobley and Jess Lander noted in the San Francisco Chronicle “McMillan carved out a niche by establishing the bank as one of the few institutions that could cater to the nuanced needs of the wine industry. Wineries tend to make substantial investments in land, equipment and other assets years before they can sell a bottle of wine — a complex system that McMillan made a business of understanding.”

Whether they deposited money in the bank or borrowed from it, many US grape-growers and winery owners relied on SVB insight and advice when making long term plans. They now almost certainly face having to create and build relationships with new bankers who may take a different view of the loans they have negotiated and want to negotiate in the future.

Investing in 'Napa lifestyle'

There was a neat symbiosis in the bank’s relationships with two of the most famous valleys in North America: Silicon and Napa. Tech venture capitalists who banked with SVB were often invited to take the 90-minute drive north to be lavishly entertained in its customers’ wineries. Inevitably some of the more successful of these high-fliers then felt tempted to buy vineyards and wine businesses of their own.

According to S&P Global Market Intelligence, 97% of SVB account-holders had deposits in excess of the $250,000 covered by the US Federal Deposit Insurance Corporation. Indeed, the average customer is thought to have had $3.5m in the bank, so, given that average $3.5m deposit, there has been no shortage of customers who could afford to spend some of their wealth on a ‘Napa lifestyle’.

Pricier land

In the first two decades of this century, the cost of prime Napa Valley vineyards roughly tripled, rising from $150,00 per acre (€346,000 per/ ha) to $450,000 (€1,037,000), with some top properties going for over $750,000 per acre.(€1,726,000).

How far the arrival of VC money has helped to fuel this growth is debatable. One Napa insider says that “Maybe a few tech people have bought into vineyards but that hasn’t driven up their values.” The insider blames “other market dynamics.

Another, similarly well-informed, source, agrees that tech investors weren’t by any means the “primary driver” but “they definitely are a key contributor to the increases.”

Pricier grapes

Napa grape prices rose in tandem with the cost of the land, helping to explain the normalisation of bottles of red with retail prices of $100-200 or more. These prices, and tasting rooms like Spottiswoode's that charge visitors $75 simply to taste three of its wines, are arguably of greater relevance to people associated with the finance world and tech start-ups than to the average US wine drinker.


There was sobering news at the annual presentation of the Silicon Valley Bank report—young consumers are showing no signs of embracing wine as they mature.

Reading time: 3m 50s

State of play

The future of the bank is uncertain at the time of writing. During the weekend, it was, however, announced in a joint statement by the US Department of the Treasury, Federal Reserve System governors and the FDIC that “depositors will have access to all of their money starting Monday, March 13.”

The FDIC are urgently looking for a buyer. Perhaps unsurprisingly, Elon Musk has said - via Twitter - that he would be "open" to acquiring it. Anything is possible, but this is not considered a likely outcome. A far more credible possibility is that the wine division might find a future home in a bank with experience of agricultural lending.

The UK subsidiary has been speedily bought by HSBC without any financial help from the British government, indicating the fundamental healthiness of that part of the business.

A future home in a bank with experience of agricultural lending.

The US announcement means that depositors can breathe a sigh of relief, as can employees of wineries and tech start-ups whose salaries and even jobs might have been at risk.

As a shareholder, Rob McMillan has no such protection, and his role as a provider of data and analysis to the US wine industry is uncertain. 

Rob McMillan
Rob McMillan

The international wine industry needs far more accurate information than it currently gets. It would be a huge pity if Rob McMillan’s contribution were no longer as available as it has been.

SVB Bank – the full story

The recent history of SVB is one of rapid rise and even swifter fall.

Fluctuating deposits

In 2018 it had $49bn in deposits. By the end of 2020 this had swelled to $102bn, a figure that almost doubled again to $189.2bn during the funding boom of 2021. The bank used some of this cash to buy long term treasury bonds which, to younger bankers who had never experienced high interest rates, must have seemed a sensible, safe choice. In 2022, it also bought $80bn of Mortgage-Backed-Securities which ought to have rung a few bells from the 2008 crash.

Last year, several things happened. Fearing recession, customers concerned about liquidity began to withdraw funds and, for the same reasons, the Federal Reserve raised interest rates, dramatically. Investors could now get 3.9% on 10 year Treasury bonds, compared to 1.9% from SVB.

Venture capital funding slowed dramatically. In May 2022, Fortune reported that “the good times in Silicon Valley come crashing to a halt” and, in the last quarter of 2022, VC firms raised $20.6bn, nearly two thirds less than in the same period in 2021. Instead of VCs putting cash from new investment rounds into the bank, they were making withdrawals from their existing deposits to cover their running costs.

The recent history of SVB is one of rapid rise and even swifter fall.

Problems in the cryptocurrency market

Then came the bankruptcy of the FTX cryptocurrency exchange, which, last week, triggered the collapse of Silvergate Bank, one of the few institutions in the crypto sphere to be regulated. FTX was a major Silvergate client and its failure led to the bank suffering a $1bn loss. SVB was far, far less involved with cryptocurrencies - though one crypto business, Circle, revealed that $3.3bn of its dollar reserves were with the bank – but the timing was very unfortunate.

It contributed to the background against which – in the same week – SVB announced the sale of $21bn worth of securities and the intention to raise $2.25bn by selling stock.

The following day, on March 9th, Bloomberg reported that Founders Fund, the VC fund co-founded by Peter Thiel, with over $11bn in aggregate capital under management, had advised businesses to withdraw their cash from SVB. All apparently did so.

Herd animals

As Bloomberg columnist Matt Levine noted “nobody on Earth is more of a herd animal than Silicon Valley venture capitalists” and Thiel’s call helped spark what was described as the “first smartphone bank run”. There is nothing new in bank runs – a mass of customers queueing to withdraw their money at the same time out of fear of losing it. In recent times mandatory insurance schemes seek to prevent this from happening. But it has been estimated - by S&P Global Market Intelligence - that 97% of SVB account-holders had deposits in excess of the $250,000 covered by the US Federal Deposit Insurance Corporation.

SVB “came within twenty minutes of getting enough additional cash to fix likely problems.” But it failed and the bank was forced to stop trading.

Indeed, the average customer is thought to have had $3.5m in the bank. So there was plenty of incentive for them to have felt nervous.the fact that only 3% of SVB deposits were covered by the US FDIC scheme helps to explain explain customers’ nervousness.

Any bank run is notoriously hard to deal with; banks have long term investments that have real value but can only be turned into cash quickly at a loss. Even so, according to former Deputy Assistant Secretary of the U.S. Treasury, Brad de Long, in his substack, SVB “came within twenty minutes of getting enough additional cash to fix likely problems.” But it failed and the bank was forced to stop trading.


In an exclusive broad-ranging interview for Meininger’s, Rob McMillan of the Silicon Valley Bank offered Robert Joseph, editor at large of Meininger’s Wine Business International, a view of the current and future of the US wine industry from the perspective of an informed financial analyst.

Reading time: 12m 40s

No risk officer

As winemaker David Graves of the Saintsbury winery, an SVB customer – and borrower – for a decade, said “There’s no evidence I’ve seen that this is a matter of bad loans — it’s the other side of the ledger.” However, Graves also acknowledges the fact that the SVB’s chief risk officer, Laura Izurieta stepped down in April 2022 and was not replaced until January of this year. Her replacement, Kim Olson who was previously at the Japanese Sumitomo Mitsubishi group, was highly experienced but, as Graves says, “it was too late. The balance sheet had blown up, bond duration choices made, bad news on mid-term-markets already baked in, net movement of VC cash out…”



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