People were already lining up outside Silicon Valley Bank’s Santa Clara headquarters early on March 10, 2023. They were standing on the sidewalk with their phones in hand, attempting to determine whether their company’s funds were still available or had essentially disappeared. The situation was getting worse inside the building, somewhere in the administrative tiers of a 40-year institution that had been a quiet pillar of the startup economy, more quickly than anyone in management seemed to have anticipated.
Dale Wettlaufer, a partner at the short-selling company Bleecker Street Research, was on the phone guiding a reporter through the balance sheet less than an hour before California regulators formally closed the doors. For two months now, he had been observing those figures. He had wagered that the floor would collapse in January. “I’ve never seen a balance sheet crumble this quickly,” he remarked. The problem is that he wasn’t referring to the last 48 hours. He was referring to the preceding two years.
| Field | Details |
|---|---|
| Key Figure | Dale Wettlaufer — Partner at Bleecker Street Research, a short-selling investment firm that opened its SVB short position in January 2023 |
| Short Position Opened | January 2023 — two months before SVB’s collapse on March 10, 2023 |
| SVB Collapse Date | March 10, 2023 — California financial regulators shut Silicon Valley Bank’s doors; largest US bank failure since the 2008 financial crisis |
| Short Seller Profits | Short sellers collectively made approximately $500 million in paper profits on SVB’s single-day collapse (Bloomberg) |
| SVB’s Fatal Error | Bank sold $21 billion in holdings at a $1.8 billion loss, then announced a $2 billion capital raise — triggering immediate panic reminiscent of Lehman Brothers’ final days |
| Root Cause (Fed Review) | Federal Reserve’s post-collapse review called it “a textbook case of mismanagement” — senior leadership failed basic interest rate risk controls as rates rose rapidly |
| Trigger Mechanism | Social media-accelerated bank run — Peter Thiel’s Founders Fund and other prominent VCs publicly advised portfolio companies to withdraw funds, compressing a classic bank run into 48 hours |
| First Republic Pattern | Short interest in First Republic Bank climbed from under 5% to between 7–37% of shares borrowed in March 2023 as contagion spread (Reuters) |
| SVB’s Former Role | SVB served as banker or lender to approximately half of all US venture-backed startups, plus numerous VC funds and PE firms — touching virtually every corner of the private markets |
| Historical Parallel | Multiple VCs compared SVB’s collapse to Lehman Brothers (2008) — specifically citing how SVB’s “everything is fine” messaging echoed Lehman’s final communications before failure |
Bleecker Street’s short position on SVB was not the result of speculation or a trade motivated by rumors. It was the result of closely examining a financial statement and focusing on its actual content rather than the bank’s public claims. SVB had amassed deposits at an astounding rate during the low-rate pandemic years. Startups were flush with venture capital, parking hundreds of millions at the bank while they burned through it, and SVB had taken a sizable portion of those deposits and locked them into long-term bonds.
Those long-term holdings quickly lost value when the Federal Reserve started its aggressive cycle of rate hikes. The bank was sitting on unrealized losses that it had managed to avoid formally recognizing until the very last minute. Wettlaufer noticed that. He positioned himself in accordance with the discrepancy between what SVB owed and what it possessed.
What transpired next became an example of how quickly institutional trust can be lost in the age of social media. Companies in Peter Thiel’s Founders Fund were advised to withdraw their investments. The VC community adopted that advice in a matter of hours rather than days. As late as Thursday night, SVB attempted to allay worries with messaging that, to anyone who lived through 2008, fell flat; the tone of “everything is fine” was precisely the same as what Lehman Brothers employed in its last weeks. In the words of one venture capitalist, “They repeated mistakes in history.” What could have taken weeks was condensed into about 48 hours by the subsequent bank run. In a single day, short sellers made about $500 million. One company that had positioned itself correctly was Wettlaufer’s.
That track record is exactly what gives his current work its unique weight. Short sellers are frequently written off as opportunists or market destabilizers—people who take advantage of and sometimes accelerate the failures of others. There is a valid version of that criticism, and worries about piling on were somewhat validated by the way First Republic Bank’s stock behaved in the weeks following SVB’s failure, with short interest rising to as high as 37% of borrowed shares.
The more truthful accounting, however, is that the short sellers who discovered SVB’s issues in January 2023 were reading public data and making judgments that the bank’s management and, presumably, its regulators had refused to make. In its post-collapse review, the Federal Reserve referred to it as “a textbook case of mismanagement.” The issue wasn’t being caused by the short sellers. They were one of the few individuals who were focused enough to notice it.
Observing this specific area of finance, there’s a sense that the times when short sellers release new research—especially those who have previously been correct, in public, in ways that proved expensive to ignore—deserve more careful consideration than they usually get. Both institutions and markets have an innate tendency to view such reports as adversarial noise. That intuition is sometimes right. Occasionally, you realize the noise had a purpose when lines begin to form outside a building.