The Silicon Valley Bank (SVB) collapse was the first domino to fall in the 2023 banking crisis, with Signature Bank succumbing a few days later. In less than two months, First Republic Bank (FRB) became the third victim, and it currently stands as the second-largest bank collapse in US history (in terms of total assets), only surpassed by Washington Mutual in 2008.

FRB’s business model targeted wealthy and affluent clients and was quite successful in a low-interest rate environment. It capitalized on the growing tech wealth in Silicon Valley by accepting deposits at near-zero rates and lending this money as real estate loans to high-net-worth individuals (HNWIs) with a low risk of default. The bank compensated for the lower deposit yields by providing high-quality, personalized customer service that relied on referrals and word of mouth to attract new clients. While FRB did not appear to take obvious risks compared to SVB and Signature Bank (which collapsed before it), concerns about its future were already in the air after SVB's collapse. Last weekend, the Federal Deposit Insurance Corporation (FDIC) took over FRB and orchestrated a deal to sell its assets and certain liabilities to JPMorgan to prevent a wider fallout and to avoid the FDIC having to assume all deposits of the bank.

What brought the bank that lent to HNWIs like Mark Zuckerberg to its demise? This report aims to answer that by delving into the main reasons behind FRB's collapse, its impact on the startup ecosystem, and what comes next for the sector.