Peter Thiel’s Founders Fund was one of the first venture capital firms to take action and urged clients to quickly withdraw funds from Silicon Valley Bank last week. The company reportedly divested itself of all its holdings in SVB on Thursday morning, just as panic over the bank’s solvency began to emerge on social media, from where it was a historic $42 billion bank on Friday that collapsed SVB. Thiel and the company have come under fire online for the role they played in the bank run that followed, but the billionaire investor and PayPal co-founder himself denied that he wanted to fail. After all, Thiel said, he kept his own money there.
“I have $50 million of my own money stuck in SVB,” Thiel said Financial Times columnist Gillian Tett in an article published Thursday. While he held his own money in the bank, Thiel became bigger as SVB primarily catered to startups and venture capital firms. The bank held $175.4 billion in total deposits when it was seized, according to federal regulators. Surely, Thiel would also withdraw $50 million himself if he thought SVB would fail?
Thiel is one of the many clients who were left disoriented and scrambling last week when SVB publicly disclosed some financial problems can help explain the mentality of the bank open last week. The founder of the Fund canceled all deposits with SVB by Friday morning, according to Axios, with the intention of returning once the panic subsides. Thiel was reportedly not part of the conversation.
When on Thursday, the company began to get nervous, finally began to advise portfolio companies, which last year collectively about $ 11 billion in investment, to withdraw their own funds, saying that there are some risks and disadvantages to doing so.
Founders Fund was far from the only VC firm to add to the panic surrounding SVB, sending its shares down 60% last Thursday, before falling another 20% after the market and then falling again in pre-market trading on Friday. The failure of SVB has been defined as the first bank supported by social media, as investors and venture capitalists took to platforms like Twitter and instant messaging apps last week to spread news and panic about the bank’s financial status. SVB CEO Greg Becker warned against exactly this phenomenon during a call to investors on Friday, saying the bank will only be in crisis if “everyone tells each other SVB is in trouble.”
Investors and founders later criticized him fiercely for his role in causing the crisis. “This emergency was not helped by investors who were distracted and managed the bank’s operations,” said Madison Maxey, CEO and founder of Loomia. an insider Friday.
Many VC firms, including Pear VC in San Francisco and Hoxton Ventures in London, have advised their portfolio companies to withdraw funds from SVB, but Thiel’s Founders Fund still gets the most heat due to its speed of action and large portfolio size.
In the statement to AxiosCFO Fund Founder Neil Ruthven said: “Thursday morning it was clear that we were in the middle of a bank run, and we reacted in line with our fiduciary duty.”
Like the manager at Founders Fund who advises clients to temporarily withdraw their funds, Thiel doesn’t believe SVB will fail, he said. FT.
Thiel, like all those who have accounts at SVB with deposits exceeding the insurable limit of $250,000, will be able to recover all their money after the government stepped in over the weekend with extraordinary measures to ensure that all depositors will be settled. While Thiel would certainly be happy to see the money returned to him, the funds he couldn’t access over the weekend are unlikely to make a big profit at $8 billion.
The Fund’s founder and Peter Thiel did not immediately respond fortunerequest for comment.