Can Peter Thiel’s Fellowship of Billionaires Replace Silicon Valley Bank?

Billionaire investor Peter Thiel is back with another Tolkien-inspired venture: Erebor. The bank, named after the mountain where the dragon Smaug hoards his treasure, plans to serve tech startups and crypto companies. 

Thiel is part of a group of investors led by Palmer Lucky, the cofounder of Anduril — which, yes, is a reference to “The Lord of the Rings.” Jon Lonsdale, the cofounder of defense tech company Palantir, is also part of the group, and Palantir’s name is … you get it.

Luckey and Lonsdale view Erebor as an opportunity to fill the void left by the collapse of Silicon Valley Bank, according to the Financial Times.

One Bank to Rule Them All

And in the darkness … fund their crypto startups? 

Erebor’s bank-charter application targets “the innovation economy,” including companies involved in virtual currencies, AI and defense technology — riskier ventures that have struggled to access capital since the demise of Silicon Valley Bank.

Some backstory to set the scene for Erebor’s foray into the financial world:

• At its height, SVB was the 16th-largest bank in the US, with $218 billion in assets. It was a go-to institution for early-stage tech and crypto startups. But in 2023, investors withdrew $42 billion in a single day after the bank slashed its annual guidance. With the majority of its assets uninsured, the bank collapsed, triggering a domino effect that led to the collapse of Signature Bank and First Republic.
• Although SVB was brought back to life under First Citizens Bank, its risk tolerance didn’t seem to recover. Across the financial industry, funding for early-stage startups dried up following SVB’s demise.

But now, two years after the incident, investors’ optimism is rising and startups are on the hunt for funding.

Second Breakfast: It’s not quite 2021 again, but markets are trending in that direction. The S&P 500 and Nasdaq both hit fresh records last week, and the IPO market is waking up after more than three years of hitting the snooze button. More companies have gone public so far this year than have since the bell-ringing heyday of 2021, including AI cloud company CoreWeave and crypto biz Circle. Speaking of crypto, bitcoin is above $108,000 this morning, not far off its near-$112,000 record high reached in May. Regulators, meanwhile, are developing ways to prevent a future SVB situation, with a new set of global banking reforms in the works.