Xuan-Thao Nguyen has found a genuine unicorn in the land of “unicorns”: a bank that serviced the billion-dollar startups of Silicon Valley and yet was beloved by its customers and the surrounding community. Perhaps this is a story that could only be told in that unusual setting south of San Francisco, with its long history of creating companies that surprised, delighted and, of late, often angered the world at large. In this book, Nguyen asks how this same region could also give rise to the Silicon Valley Bank (SVB), a singularly successful and popular financial institution in a country where, she explains, all bankers knew one big thing: their “customers hate them” (p. 1). Somehow, SVB overcame the longstanding hostility in America to “finance” and won an unprecedented level of allegiance from startup founders, venture capitalists, and even nonprofit organizations trying to level up opportunity in a region with deep socio-political tensions and economic inequality. Yet, despite a 40-year record of almost uninterrupted success, SVB was brought down seemingly overnight by that same environment, as its wealthy and successful client base turned on it in a 2023 bank run that sent shock waves all the way back to Congress and regulators in Washington DC.

For Nguyen, an intellectual property and finance scholar who has long been puzzled by the unwillingness of banks to lend to startup companies, SVB is the exception that proves the rule. The explanation of SVB’s rise to power and profit, gleaned from her thick descriptive narrative, is that its founders discovered an arbitrage opportunity: there was money to be made by filling a gap left by those large, lumbering, conservative, and widely disliked commercial banks long headquartered in faraway San Francisco. “The Valley” took off in the Cold War era, fueled in part by massive military spending. But traditional legal and financial institutions located an hour to the north in “the City” ignored the tremendous opportunity available. Dozens of small startup companies in need of financial and legal services began to sprout up in and around the suburbs of Palo Alto, Menlo Park, and Sunnyvale in the late 1960s and 1970s as the almost unlimited potential of semiconductor technology became increasingly clear. Into this gap came first the venture capitalists with early-stage funding, soon to be followed by small local law firms that would grow in headcount and power alongside the new investors and entrepreneurs.

Interestingly, as Nguyen explains, the one longstanding “old money” institution that saw the opportunity was Stanford University, which set up an industrial park on its expansive empty land holdings along the southern edge of its main campus. Hewlett Packard established its headquarters there with a 100-year lease. They were joined over time by many other tech startups as well as new law firms like Wilson Sonsini P.C. and Cooley LLP, which remain to this day vital to the Valley ecosystem. On Stanford’s northern border along the now famous Sand Hill Road, in Menlo Park, where SVB would eventually set up shop, the venture capital industry took root. In the middle of the campus itself, many of the Valley’s future scientists, investors, lawyers, and engineers were being trained.

Out of that latter group came the key founder of the bank, Robert Medearis, a successful real estate executive who taught in Stanford’s engineering program for decades. His students kept asking him “why banks kept saying ‘no’ to young entrepreneurs” (p. 37), including, famously, a young Steve Jobs. The fledgling bank, founded in 1983 with its own startup capital of $5 million from 100 investors, was consciously established to “say ‘yes’” (Id.) to those same entrepreneurs. Sure enough, it grew rapidly in parallel with the rise of the Valley. The key was the Bank’s “be different” (p. 95) approach: a willingness to provide early-stage financing to complement venture capital funding and then, at the same time, to provide a reasonably safe place to park all that newly minted wealth. SVB exploited two forms of financial capital, “venture debt” (covenant-lite loans to early-stage companies) and stock warrants (a right but not an obligation to buy a company’s stock), to support and profit from this explosive setting. SVB, in other words, became incredibly profitable by mimicking the behavior of the Valley’s venture capitalists and law firms: it took equity stakes in its clients’ businesses via the stock warrants the Bank would request when loaning to startups looking to go public or to merge into larger firms.

This innovative, and risky, strategy enabled SVB to succeed in a manner unavailable to banks in other areas of the economy. It was not weighed down by the focus of traditional banks on lending to retail customers and businesses with positive cash flow, but no real growth potential. Instead, SVB focused almost exclusively on a dynamic combination of venture capital funds, wealthy angel investors, and startup and then public companies emerging in the Valley. At its peak, “50 percent of all venture capital-backed tech and science companies in the United States” were its clients (p. 2). In addition to offering conventional banking services for entrepreneurs who were flush with venture capital or IPO funds, SVB established its own investment banking and venture capital subsidiaries.

And yet this tale turned to tragedy in 2023. The bank’s leadership somehow irresponsibly ignored a widely recognized upward change in the trend of interest rates. This may not have brought down a traditional bank, but it was a mistake that became fatal for SVB. As Nguyen admirably unpacks the story, while SVB’s apparent diversification across assets and profit centers seemed to provide it with an unusual level of stability, it had become heavily concentrated on a client base that was far from diverse. The core strategy of building itself around venture-backed startups in tech centers like Silicon Valley meant that its customers increasingly looked alike (overwhelmingly white male “tech bros” (p. 252)) and thought alike.

More importantly, however, they all knew each other. And when word spread that SVB might be facing a funding mismatch—as interest rates rose, the value of the bank’s investment of depositors’ funds in government securities fell—it sparked a classic “old banking” sector problem: a run on the bank. And this is where SVB’s tech focus really hurt. In 2023, unlike, let us say, 1963, it was a simple matter to press a few keys and move one’s money from one bank to the next. A few nervous venture capitalists among their clientele, showing as little loyalty to SVB as they sometimes do to their own startups, suggested that customers move their money. Thousands did, to the tune of $42 billion dollars in a single day.

In the end, Nguyen bemoans, “the tech community burned down their own bank” (p. 252). If tech bros lit the match, however, it was Washington’s deregulatory approach to banking that created the dry timber. SVB executives likely now regretted their own past lobbying in favor of exemptions from the regulations put in place after the 2007 mortgage bubble collapse. The bank was swiftly taken over by federal regulators and its storied history in the Valley ended, like so many of the failed startups and even public companies that now are only memories in a place that rarely looks backward. Fortunately, Nguyen has told this one institution’s story with depth and clarity. Her effort in an area that is undertheorized serves as a powerful case study that will be of use to scholars and students across disciplines, including political economy, finance, law, sociology and business.