E119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more

Public data show that the feared, sustained payroll crisis for SVB‑banked startups did not materialize once regulators intervened.

On March 12, 2023—one day after the podcast release—the U.S. Treasury, Federal Reserve, and FDIC announced a systemic‑risk exception for Silicon Valley Bank, explicitly stating that all depositors, insured and uninsured, would be “fully protected” and would “have access to all of their money starting Monday, March 13.” (techcrunch.com) This meant funds were not locked in receivership for “the next few weeks,” but instead unfrozen within roughly one business day.

Sen. Alex Padilla’s statement about this action emphasized that it would ensure “millions of workers across the country will be paid on time,” underscoring that the policy response was specifically designed to prevent widespread missed payrolls at SVB‑banked firms. (padilla.senate.gov)

Before that government backstop was announced, Y Combinator and others warned that up to ~10,000 startups might be unable to pay employees in the next 30 days if deposits remained inaccessible, and that around 30% of YC companies exposed via SVB were at risk of not making payroll. (livemint.com) These were scenario projections and risk estimates, not reports of what actually ended up happening once all deposits were guaranteed.

Post‑intervention reporting instead describes startups as anxious but generally able to stitch together short‑term fixes (new bank accounts, emergency credit, loans) until their SVB funds cleared. NPR, for example, profiles founders who, by Monday March 13, had new accounts and fallback methods (like paper checks) to meet payroll and explicitly characterizes the situation as “turning into a nuisance versus a catastrophe.” (nepm.org) Retrospective summaries note that many startups were initially unable to retrieve money and had to take loans to make payroll, and warn that continued inaccessibility could have led to mass furloughs or shutdowns—again using conditional language about a risk that large‑scale policy intervention ultimately averted. (en.wikipedia.org)

There is some evidence of isolated, short‑term payroll disruptions (e.g., employees whose Friday March 10 paychecks failed because their payroll provider used SVB), but available reporting and later analyses do not show that “thousands of companies” ended up unable to make payroll over the following weeks due to frozen SVB deposits. (washingtonpost.com) Instead, regulators’ rapid guarantee of all deposits and emergency support from VCs and alternative banks largely prevented the prolonged, large‑scale payroll failure scenario described.

Because access to funds was restored quickly and the evidence points to a brief liquidity scare with limited, short‑duration payroll issues rather than a weeks‑long inability for thousands of startups to pay employees, Sacks’s prediction that “probably thousands of companies now cannot make payroll in the next few weeks because their money is trapped and tied up at Silicon Valley Bank” is best judged as wrong.

Sacks was warning that, as a result of Silicon Valley Bank’s failure, “maybe thousands” of small venture‑backed startups could be wiped out because they would lose access to their deposits and be unable to make payroll.

What actually happened:

• On March 12, 2023 (the day after the episode dropped), the U.S. Treasury, Federal Reserve, and FDIC invoked a systemic risk exception and explicitly guaranteed that all SVB depositors – insured and uninsured – would be fully protected, with access to all of their money starting Monday, March 13. (fdic.gov)
• SVB’s operations were transferred into a bridge bank and then sold to First Citizens, with deposits assumed and branches reopened, so customers (including startups) could continue banking. (en.wikipedia.org)
• In the UK, HSBC bought Silicon Valley Bank UK for £1 in a government‑brokered rescue that explicitly aimed to avert an “existential threat” to the UK tech sector and allowed SVB UK customers to “continue to bank as usual,” again preventing mass failures of otherwise viable startups. (legaltechnology.com)
• Contemporaneous analysis from within the startup ecosystem itself described the situation as an “extinction level disruption” that would have pushed thousands of companies over the edge if deposits remained frozen for weeks or months, but noted that “disaster was averted when the gov’t came in … by guaranteeing depositors their money.” (adamant.beehiiv.com)

While many startups have since failed amid higher interest rates and a broad venture funding downturn, those failures are part of a wider macro/VC cycle. Available reporting attributes the SVB episode to temporary hardship and financing headwinds, not to thousands of startups being randomly wiped out solely because their SVB deposits disappeared. Given the scale of coverage around SVB, such a mass, direct wipeout would almost certainly be documented, and it is consistently described instead as a near‑miss scenario.

Therefore, as a prediction about what would happen ("thousands" of otherwise sound venture‑backed startups being wiped out as a consequence of the SVB failure), it did not come true.

The prediction was explicitly conditional: “unless the Fed steps in here over the weekend, we're going to see … a run on the regional banking system, a cascade like we saw in 2008.” In reality, the Federal Reserve, FDIC, and Treasury did step in on Sunday, March 12, 2023, announcing that all depositors at Silicon Valley Bank and Signature Bank would be fully protected and launching the Bank Term Funding Program to provide liquidity to banks.(fdic.gov)

Because the key condition (“unless the Fed steps in over the weekend”) was not met, we cannot directly observe what would have happened in the absence of intervention. Some regional banks did experience runs and stress — for example, Signature Bank suffered heavy withdrawals before being closed on March 12, and First Republic later failed amid large deposit outflows — but regulators again intervened and contained the fallout, preventing a 2008-style systemic collapse of the entire regional banking system.(fdic.gov)

Since the scenario the prediction was about (no Fed intervention over that weekend) never actually occurred, and the interventions themselves plausibly altered the outcome, the truth of the counterfactual claim (“there would have been* a cascading crisis like 2008 if they hadn’t intervened”) cannot be empirically determined. Hence the result is ambiguous, not demonstrably right or wrong.

Chamath’s prediction was that by Monday or Tuesday after the March 11, 2023 recording, affected companies and employees would be “on the other side” of the SVB crisis with “not a lot of damage.” This quote and its timing are confirmed in the episode transcript, where he expresses hope that founders and employees will be through the immediate crisis by Monday or Tuesday. (podscripts.co)

What actually happened aligns closely with that forecast:

1. All deposits were guaranteed and made available starting Monday, March 13. On March 12, the U.S. Treasury, Federal Reserve, and FDIC issued a joint statement saying all Silicon Valley Bank depositors would be “fully protected” and that “Depositors will have access to all of their money starting Monday, March 13.” (theguardian.com)
2. A bridge bank was created so normal banking could resume immediately. The FDIC converted the receivership structure into Silicon Valley Bridge Bank, N.A., transferring all deposits (insured and uninsured) and reopening branches with normal hours and services on Monday, March 13, giving customers full access via ATMs, debit cards, checks, and online banking. (hunton.com)
3. Most startups regained access to funds on March 13 and resumed operations. Contemporary reporting and later summaries note that many technology entrepreneurs and startup founders regained access to their deposits on March 13 and immediately began wiring funds to new banks and payroll processors so they could meet payroll and operating expenses. (en.wikipedia.org)
4. The feared “extinction event” for startups did not materialize. While the collapse caused a weekend of intense stress and some short-term operational disruptions (e.g., delayed payroll runs, scrambling to re-paper banking relationships), the combination of full depositor protection and the bridge bank structure meant that startups and their employees generally did not suffer permanent loss of deposits or mass closures attributable directly to frozen SVB funds. The real losses fell on SVB’s shareholders and certain creditors, and the broader banking system bore costs via special assessments, not on depositors or employees of portfolio companies. (financialhorse.com)

Given that by Monday–Tuesday (March 13–14, 2023) most affected startups had regained access to their money and were able to continue operations, and the worst-case scenario of widespread company failures and unpaid employees was largely averted, Chamath’s prediction that the immediate crisis would be mostly past for companies and employees with “not a lot of damage” is broadly right (acknowledging there was short-term stress and some localized disruption, but not the systemic wipeout that had been feared).

Regulators did not arrange over the March 11–12, 2023 weekend to place Silicon Valley Bank into the hands of J.P. Morgan or a similar large acquirer. Instead, on Monday, March 13, the FDIC created Silicon Valley Bridge Bank, N.A., transferring all deposits and substantially all assets into this FDIC‑operated bridge bank, while it sought a buyer. A purchase-and-assumption agreement with First–Citizens Bank & Trust was only reached on March 26, well after the weekend in question, and involved a regional bank rather than a JPMorgan‑style G‑SIB. (content.govdelivery.com)

In the following week (March 13–17), the banking turmoil clearly continued to cascade:

• Signature Bank had already been closed on Sunday, March 12, with the FDIC creating Signature Bridge Bank and invoking a systemic‑risk exception—part of the same unfolding crisis. (fdic.gov)
• Regional bank stress intensified after markets opened Monday. First Republic Bank, which shared SVB’s vulnerability to large uninsured deposits, saw its stock price and depositor confidence collapse, prompting a $30 billion rescue deposit package on March 16 from 11 of the largest U.S. banks (including JPMorgan, Bank of America, Citigroup, and Wells Fargo), explicitly framed as an effort to stabilize the banking system amid post‑SVB turmoil. (cnbc.com)

So the first branch of Sacks’s disjunction (“they place SVB in the hands of a J.P. Morgan–type bank this weekend”) did not occur. The second branch (“or this thing keeps cascading next week, if they don’t”) did occur: no such weekend takeover happened, and the banking/startup‑funding shock continued into the following week with additional bank failures, severe stress at First Republic, and extraordinary rescue measures. On that basis, the overall conditional prediction—if no big‑bank takeover this weekend, the crisis keeps cascading next week—was essentially right, even though regulators chose a different resolution mechanism (full depositor protection plus a bridge bank) than the two options Sacks explicitly named.

Public statements and regulatory actions show the opposite of this prediction occurred.

On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC issued a joint statement that explicitly said Silicon Valley Bank depositors "will have access to all of their money starting Monday, March 13" and that all depositors would be fully protected.(fdic.gov)

On March 13, 2023, the FDIC announced it had transferred all deposits, both insured and uninsured, into an FDIC‑operated bridge bank and that depositors would have full access to their money beginning that morning, with all depositors made whole.(fdic.gov) Multiple contemporaneous reports (Bloomberg, TechCrunch, CoinDesk, others) confirmed that SVB customers would have access to all funds on Monday under this guarantee.(bloomberg.com)

Sacks predicted that depositors would not know their recovery or receive full distributions by Monday and that the process could take weeks or months. In reality, U.S. regulators guaranteed full recovery on Sunday and implemented it on Monday, March 13. Therefore, this prediction is wrong.

Multiple contemporaneous reports from March 11–12, 2023 describe exactly the situation Chamath outlined: distressed and hedge-fund buyers approaching SVB depositors and offering to buy their uninsured deposit claims at steep discounts, with the low end around 60 cents on the dollar.

• Semafor, cited by Reuters and others, reported that hedge funds were offering to buy startup deposits stranded at SVB "for as little as 60 cents on the dollar," with bids generally in the 60–80 cents range for uninsured deposits in the immediate aftermath of the failure. (investing.com)
• Further coverage identified firms such as HPS Investment Partners and Oaktree Capital Management offering to buy SVB deposit claims at discounts between 60 and 75 cents on the dollar, again within the first couple of days after the bank was seized. (economictimes.indiatimes.com)
• Additional summaries of the episode similarly note that some buyers were offering to purchase SVB client deposits at 60–75 cents on the dollar. (costar.com)

Chamath’s statement that, immediately after SVB’s collapse, a company with large deposits at SVB was offered about 60 cents on the dollar for its claim is therefore consistent with independent reporting on actual bid levels in that time window. While regulators ultimately guaranteed all deposits at par, his claim about the immediate distressed-debt pricing was accurate.

What was predicted

Friedberg’s claim was explicitly conditional:

If by ~48–72 hours after the end of the March 11–12, 2023 weekend all SVB depositors do not have 100% of their deposits available in cash, then there will be a “real crisis” with a massive run from institutions that don’t offer fully liquid cash.

So the prediction only applies in a world where SVB depositors are not fully and quickly made whole.

What actually happened

On Sunday, March 12, 2023, U.S. regulators (Treasury, Federal Reserve, FDIC) invoked the systemic risk exception and announced that all Silicon Valley Bank and Signature Bank depositors, insured and uninsured, would be fully protected and would have access to all their money starting Monday, March 13, 2023. (fdic.gov) SVB deposits (insured and uninsured) were transferred into a bridge bank and made available, with the cost of covering uninsured deposits to be recouped via special assessments on banks. (sec.gov)

Because of that intervention, the antecedent condition of the prediction (“if depositors don’t get 100% within 48–72 hours”) never occurred. In reality, regulators acted specifically to prevent the kind of broad bank run Friedberg was warning about; Fed and FDIC officials later described the measures as aimed at calming uninsured depositors and limiting contagion. (fdic.gov)

Why the outcome is ambiguous

• The prediction is a counterfactual causal claim: it asserts what would have happened under a scenario that did not materialize.
• Since depositors did receive full protection very quickly, the scenario “no full access within 48–72 hours” was never tested in the real world; we cannot directly observe whether there would have been the “massive run” he described.
• We can see that regulators took his scenario seriously enough to act pre‑emptively, but that does not prove the magnitude of the hypothetical run, only that authorities perceived substantial risk.

Because the required condition for the prediction to be evaluated never occurred, its truth or falsity cannot be established from observed outcomes.

Conclusion

The correct classification is "ambiguous": there has been more than enough time, but the prediction concerns a counterfactual world (no quick, full guarantee of deposits), so we cannot determine from actual events whether his stated consequence (“massive run”) would indeed have followed.

Key parts of Friedberg’s scenario happened, but not exactly as he specified, and whether it “avoided a broader crisis” is a judgment call.

What he said needed to happen

1. “Someone takes over Silicon Valley Bank this weekend.”
2. The federal government “guarantee 100% of those deposits.”
3. Depositors have immediate cash access the following week, to prevent a broader crisis.

What actually happened

• Full deposit guarantee and access next week: On Sunday, March 12, 2023, the Treasury, Fed, and FDIC announced a systemic risk exception for SVB. They stated that all SVB depositors would be “fully protected” and would “have access to all of their money starting Monday, March 13.” (fdic.gov) This effectively guaranteed 100% of deposits (including uninsured), funded by the FDIC’s Deposit Insurance Fund and later recouped via special assessments on banks. (reuters.com) So the guarantee-and-access part of his prescription was met very closely.

• Timing and nature of the “takeover”: Regulators closed SVB on March 10 and transferred all deposits and substantially all assets into a temporary FDIC-run Silicon Valley Bridge Bank, N.A., whose purpose was to stabilize and market the franchise. (fdic.gov) A true private‑sector buyer, First Citizens Bank, did not acquire the bridge bank’s deposits and loans until a purchase and assumption deal announced March 26–27, 2023—two weeks after the weekend in question. (ir.firstcitizens.com) So if “someone takes over … this weekend” means a private buyer, that part did not happen on his timeline; if one counts the FDIC/bridge bank as the “takeover,” it roughly did.

• Did this avert a ‘broader crisis’?

  • There was further turmoil: Signature Bank failed on March 12 and was also resolved with a systemic risk exception and full depositor protection, (hunton.com) and First Republic Bank was seized and sold to JPMorgan on May 1, 2023, becoming the second‑largest bank failure in U.S. history. (forbes.com)
  • However, there was no 2008‑style systemic collapse: the combination of the SVB/Signature guarantees and the Fed’s liquidity facilities stabilized the system, and widescale cascading failures did not materialize. (fortune.com)

Why this is classified as ambiguous

• His core policy prescription—government backstopping all SVB deposits and ensuring immediate access—did occur almost exactly as described and appears to have been central to containing contagion. (fdic.gov)
• His timing/detail about a buyer “this weekend” was off; the actual private acquisition came later, after an FDIC bridge period. (fdic.gov)
• The phrase “avoid a broader crisis” is inherently subjective: you can reasonably argue either that the measures did prevent a full‑blown systemic crisis, or that the subsequent failure of multiple additional banks means a broader crisis did occur.

Because the factual outcome partly matches (full guarantee, next‑week access) but diverges on the buyer timing, and because the success criterion (“broader crisis”) is not objectively clear-cut, the prediction can’t be cleanly labeled purely right or wrong—hence “ambiguous.”

Key elements of Jason’s prediction did not occur, even though one numerical aspect was close.

1. Scale of the backstop. He said the situation would likely require roughly $25–50 billion, about 5–10% of TARP. In practice, Treasury authorized up to $25 billion from the Exchange Stabilization Fund as a backstop for the Federal Reserve’s Bank Term Funding Program (BTFP), created in direct response to the SVB/Signature stress. (sfnet.com) TARP’s original authorization was $700 billion, so $25 billion is ~3.6% of TARP—slightly below but broadly in the same ballpark as his 5–10% of TARP framing. (en.wikipedia.org) So the order-of-magnitude part of the prediction was reasonably accurate.

2. Who bore the losses and how. SVB’s failure is estimated to cost about $20 billion to the FDIC’s Deposit Insurance Fund (DIF), funded by assessments on banks, not by general taxpayers. (fdic.gov) The FDIC is recouping those costs through a special assessment on banks, not through a taxpayer-funded capital injection. (reuters.com) This is structurally quite different from a TARP‑style government investment funded by taxpayers.

3. No TARP‑style equity/warrants in SVB or its depositors’ companies. Jason envisioned taxpayers getting senior claims and warrants in SVB and/or affected companies, allowing them to potentially earn a 50–100%+ profit. In reality:

   • Shareholders and certain unsecured debtholders of SVB were explicitly not protected; there was no federal equity infusion into SVB itself. (federalreserve.gov) SVB equity went to (or near) zero in the receivership, so taxpayer-held warrants in SVB would not have produced large gains.
   • In the actual sale, the FDIC received equity appreciation rights in First Citizens BancShares stock (up to about $500 million), which it later exercised, providing some offset to DIF losses. (fdic.gov) But this upside accrues to the FDIC’s insurance fund, not as a large, TARP‑like profit stream to general taxpayers, and it is far smaller than the ~$16–20 billion estimated cost to the DIF.
   • There were no broad-based warrants or equity stakes in the portfolio companies/depositors as part of the official rescue framework.

4. Taxpayer profit claim. Jason’s core claim was that a roughly $25–50 billion government backstop, structured with seniority and warrants, could plausibly return at least 50% and potentially 100%+ profit to U.S. taxpayers over time. Since:

   • The actual intervention did not use taxpayer-funded equity or broad warrant positions,
   • The publicly documented outcome is a large net cost to the FDIC’s fund with relatively modest offsetting upside (First Citizens equity appreciation rights), there is no realized 50–100%+ profit to taxpayers from a TARP‑like SVB backstop.

Because the actual policy architecture (FDIC resolution funded by bank assessments + Fed lending backed by a mostly unused $25B Treasury backstop) diverged from the TARP‑style, warrant-heavy structure he described, and no such profit stream to taxpayers materialized, the overall prediction about how a government backstop would work out for taxpayers is best classified as wrong, despite his back-of-the-envelope estimate of the scale (around $25B) being roughly aligned with the authorized backstop size.

The scenario Sachs warned about did not materialize. On March 12–13, 2023, just one–two days after the SVB failure, U.S. regulators (Treasury, Fed, FDIC) invoked the systemic risk exception and explicitly intervened to protect all Silicon Valley Bank depositors, including those above the normal $250,000 insurance cap. They transferred all deposits into an FDIC-operated bridge bank and guaranteed that depositors would have full access to their money starting March 13. (fdic.gov)

Regulators also launched the Bank Term Funding Program to provide broad liquidity support to other banks, specifically to prevent contagion and systemic stress from SVB’s failure. Congressional and FDIC testimony describe these actions as taken because officials feared widespread contagion if uninsured depositors at SVB (and Signature Bank) were left exposed. (fdic.gov)

Although there were additional high-profile failures (e.g., Signature Bank and later First Republic), these were resolved with further regulatory intervention and did not trigger the uncontrolled sequence of domino failures and systemic collapse that Sachs was concerned about. (reuters.com) Because the government did intervene quickly and took systemic-risk-mitigating actions, the conditional scenario he described (“government doesn’t step in” leading to dominoes and systemic risk) did not occur, so this prediction is best judged as wrong.

The prediction was explicitly conditional: “if the federal government doesn't step in here, the whole regional banking system could be decimated, and you're just going to be left with four too big to fail banks.”

What happened instead:

• On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that all depositors of Silicon Valley Bank and Signature Bank would be fully protected, even above the normal FDIC insurance limits, and created the Bank Term Funding Program (BTFP) to support banks’ liquidity.
• This is widely described in official releases and news coverage as the federal government “stepping in” to backstop depositors and stabilize the banking system.

Because the if-clause (“if the federal government doesn't step in here”) was not satisfied, we cannot empirically evaluate the implied counterfactual outcome (whether regional banks would have been “decimated” and consolidated into roughly four big banks). The actual path of history tells us what happened with intervention, not what would have happened without it.

Therefore, the accuracy of this statement is inconclusive: the condition for the prediction never occurred, so the prediction cannot be judged as right or wrong on observed outcomes.

The prediction is explicitly conditional: if Silicon Valley Bank (SVB) depositors’ funds were effectively destroyed / not made available, then many affected startups would go out of business the next month.

What actually happened:

• On March 10, 2023, SVB was taken over by the FDIC.
• On March 12, 2023, U.S. regulators (Treasury, Federal Reserve, FDIC) announced that all SVB depositors would be made whole and have access to all their money, even above the standard FDIC limit.
• Normal access to deposits resumed shortly thereafter, preventing the scenario of deposits being permanently lost.

Because the antecedent of the prediction (deposits destroyed / not made available) never occurred, we cannot empirically test the claim that “these companies are going out of business next month.” It is a counterfactual statement about what would have happened under a policy choice that was not taken.

Therefore, the accuracy of the prediction cannot be determined from real-world outcomes; the world where deposits were not honored did not occur, so we have no direct evidence on whether mass startup shutdowns within a month would have happened.

Conclusion: The correct label is "ambiguous": enough time has passed, but the prediction concerns a counterfactual scenario that never materialized, so it cannot be definitively judged right or wrong.

Available data show that venture activity was already in a broad downturn before Silicon Valley Bank (SVB) failed, and that the months immediately after the collapse did not see private markets “seize up” or funding rounds drop to roughly half their pre‑SVB pace.

1. Deal activity and funding volumes after March 2023

• Global monthly funding:

  • February 2023 global VC funding fell below $20B and was already at a two‑year low. (nasdaq.com)
  • April 2023, the first full month after SVB’s collapse, saw about $21B in global funding, down 56% year‑over‑year but described as the second‑lowest month since July 2022—i.e., continuing an existing slide rather than a new, abrupt freeze. (news.crunchbase.com)
  • May 2023 funding was about $22B, roughly flat with April (and ~44% below May 2022), with commentary that April–May funding was averaging just above $20B, in line with 2018–2020 levels and simply “well below” the boom of 2021/early‑2022. (news.crunchbase.com)
    These levels represent a large decline versus the 2021 peak, but they are similar to, not half of, the pace already seen in late 2022 and early 2023.

• US deal counts:

  • Q1 2023 (which includes the SVB episode) already had only 2,856 observed US deals totaling $37B—the lowest quarterly deal count since 2013—reflecting a downturn driven mainly by rates and macro conditions, not SVB alone. (ssti.org)
  • In Q2 2023, the PitchBook–NVCA Venture Monitor noted that US deal counts “leveled off,” with just over 4,000 deals in the quarter and early stage posting its fourth‑most‑active quarter ever, remaining above pre‑2021 figures. (forteventures.com)
  • For full‑year 2023, estimated US VC deal count was 15,766, only modestly below 2022’s 16,464 and still above 2020 and prior years—far from a 50% collapse in the pace of financings. (ssti.org)

Taken together, this shows no evidence that in the “next few months” after SVB the number of funding rounds fell to about half of the pre‑SVB pace. The downturn was real but more like a 20–40% reduction versus 2022, and it was underway well before March 2023.

2. Term sheets and market “seizure”

There is anecdotal evidence that some deals were delayed, repriced, or renegotiated:

• Articles describing the immediate aftermath speak of a “cooling effect,” more cautious investors, and some pending term sheets being renegotiated as risk was reassessed. (fastercapital.com)

But major contemporaneous reporting also stresses that VC equity funding did not stop:

• A Fortune piece on March 21, 2023 quotes one VC calling SVB’s impact an “incremental pumping of the brakes” and “not a hard reset,” and notes that VCs were still issuing term sheets during and immediately after the crisis. (fortune.com)
• A MedTech‑focused analysis shortly after the collapse predicts a return to “business as usual” for equity financing (while warning that venture debt, not equity, would be notably harder to raise for several months). (medtechdive.com)

So while some term sheets were indeed pulled or revised, the evidence points to a temporary disruption and tighter terms, not a broad, sustained seizure where “many” existing term sheets vanished and new financings largely stopped.

3. What did tighten meaningfully: venture debt, not equity deal count

SVB’s collapse clearly hit venture debt:

• SVB held about 50% market share in US venture debt; its failure contributed to a 38% year‑over‑year decline in venture debt issuance in the following quarter, and lenders became significantly more selective. (transacted.io)

But Friedberg’s prediction was specifically about VC fundings/rounds and term sheets in private equity markets, not just debt. On that core point, the quantitative data show a continued slowdown rather than a new halving of activity immediately post‑SVB.

Conclusion

Friedberg accurately anticipated that the environment would worsen and investors would focus more on triaging existing portfolios. However, the concrete elements of his prediction—markets “seizing,” many term sheets being pulled, and funding rounds dropping to roughly half the pre‑SVB pace in the ensuing months of 2023—are not borne out by the available venture data or by broad industry reporting. The downturn was significant but more gradual and was already in progress.

Therefore this prediction is best classified as: wrong.

Friedberg’s prediction had two main parts: (1) some venture funds would shut down after the SVB crisis, and (2) many already‑distressed portfolio companies would not get bridge financing, leading to an accelerated wave of shutdowns in the rest of 2023. Both are broadly borne out by subsequent data and reporting, even though the causes were a mix of the pre‑existing downturn plus the SVB shock.

1. Venture funds shutting down

• A 2024 Venture Capital Archive report estimates that at least 9% of VC funds ceased operations in 2023, and that by 2024 a total of about 11.1% of funds had shut down, with many others effectively becoming “zombie” firms. (scribd.com)
• The Financial Times reports that the number of active U.S. VC firms fell by more than 25% from a 2021 peak (8,315) to 6,175 in 2024, and explicitly cites fund closures such as Countdown Capital (winding down and returning capital) and Foundry Group (no new funds) as examples of firms giving up in the tougher post‑2021, post‑SVB environment. (ft.com)
  These are exactly the kinds of outcomes Friedberg described when he said “funds could shut down coming out of this.”

2. Distressed startups not getting bridges and shutting down faster in 2023

• Multiple analyses describe 2023 as a “mass extinction event” for startups, with about 3,200 startups that had collectively raised around $27 billion shutting down in 2023, according to PitchBook data cited by Business Insider and summarized by other outlets. These sources explicitly tie the wave of failures to a sharp pullback in venture funding and greater investor caution, not to operational mistakes alone. (tech.yahoo.com)
• A TechCrunch/TechCrunch‑echoed data set via Carta shows 769 U.S. startups shutting down in 2023 (Carta customers that dissolved or went bankrupt), with shutdowns subsequently rising further in 2024, and commentary that the increase is driven by macro conditions and a lack of available venture funding in 2023–24. (techcrunch.com)
• TechCrunch’s November 2023 analysis of the venture market (“The time to triage is over”) notes that VCs had spent much of the downturn using reserves to “triage” portfolios with bridge capital, but that this was no longer sustainable: funds “can’t put resources toward companies that they know won’t produce a return,” and partners are now letting weaker companies sell or shut down instead. The piece predicts “a really rough period of startup shutdowns” as that reality plays out. (techcrunch.com)
• Broader 2023 commentary and data show a dramatic funding slowdown (e.g., global VC down roughly half year‑over‑year, and significant drops in deal value and fundraising), with capital concentrating in better‑performing companies and a large overhang of 2020–21‑vintage startups running out of runway. (digitalnative.tech)

Putting this together:

• There is clear, quantitative evidence that a non‑trivial share of venture funds shut down or went dormant in 2023–24, in line with the prediction that some funds would not survive the post‑SVB, higher‑rate environment. (scribd.com)
• There is also strong evidence that many distressed startups failed in 2023 because they could not raise new capital or bridge rounds, and that VCs explicitly shifted away from propping up weaker portfolio companies—exactly what Friedberg meant by saying that ~“75% distressed” companies were “done for” and “no one’s going to step in and bridge them,” leading to an acceleration of shutdowns as “cash is king.” (tech.yahoo.com)

While not every detail (like the informal “75% distressed” threshold) is directly measurable, the direction and substance of his forecast match observed outcomes: consolidation and closures among venture funds, and a clear, funding‑driven spike in startup shutdowns over the remaining months of 2023. Therefore, the prediction is best classified as right.

The prediction was that SVB’s March 2023 failure would trigger about a 60‑day freeze in venture deal-making, with new investments and term sheets dropping to minimal levels as VCs focused almost entirely on existing portfolios.

Available data and contemporaneous reporting don’t support that:

• Global VC activity was already depressed before SVB failed. Crunchbase shows Q1 2023 global funding at about $76B, down ~53% year over year, but flat quarter‑over‑quarter versus Q4 2022, meaning the quarter that included the March 10 SVB collapse did not show an additional cliff‑drop consistent with a sudden freeze. SVB is described as an “added shock to a weakened funding environment,” not the cause of a new standstill. (news.crunchbase.com)

• By late March, observers already reported that any pause in deals had largely passed. A TechCrunch piece on March 29, 2023 reported that SVB’s failure did not appear likely to have “lasting adverse impact” on venture deal activity and that “any pause the news did create … has likely already passed.” DocSend data cited there showed investor activity in pitch decks down only ~7% and founder activity down ~4% versus the same week a year prior, and multiple investors said the brief dip had reversed quickly. (techcrunch.com) That is well inside the predicted 60‑day window.

• Deal flow continued at substantial levels through Q2 2023, not “minimal” levels. Crunchbase’s Q2 2023 report shows global venture funding falling further to ~$65B (down 18% from Q1), but still funding more than 6,000 startups in the quarter, with roughly 1,500 seed and 1,200 early‑stage (Series A/B) rounds. That is a material slowdown, yet far from a freeze or near‑cessation of new deals. (news.crunchbase.com)

• VC behavior did tilt more toward existing portfolios, but not to the exclusion of new deals. S&P Global reported that, particularly in insurtech, VCs “rattled by recent events” were prioritizing reinforcing existing portfolio companies and becoming more selective about new investments, tightening an already difficult fundraising environment. (spglobal.com) PitchBook/NVCA data cited by Clearbrook show a sharp drop in venture debt volume post‑SVB, especially at early stages, but equity deals continued, indicating a shift in risk appetite rather than a 60‑day halt. (clearbrookglobal.com)

Overall, the evidence supports a continuing cyclical downturn and some short‑lived caution immediately after the SVB collapse, not a roughly two‑month period where new venture investments and term sheets fell to minimal levels. On that basis, Sacks’s specific prediction of a 60‑day freeze is best judged wrong.

Evidence from March–April 2023 shows that depositor flight and contagion did spread to other U.S. regional banks, with substantial cash outflows and runs/near-runs:

• First Republic Bank: After the SVB and Signature failures in March 2023, First Republic experienced massive withdrawals. Its Q1 2023 filings reported over $100 billion in deposit outflows in March, largely tied to uninsured and wealthy depositors moving money after the SVB collapse. Multiple analyses characterized this as a classic modern bank run driven by contagion fears from SVB.
• Sector‑wide regional bank stress: In the weeks following SVB’s failure (mid‑March through April 2023), numerous U.S. regional banks—such as PacWest and Western Alliance—saw sharp deposit declines and intense market pressure, with reports of customers shifting funds to larger banks and money‑market funds for perceived safety. Regulators and financial press widely described this as contagion from SVB’s collapse affecting regional institutions, even where fundamentals differed.
• Aggregate data on small/medium banks: Federal Reserve and industry data released later in 2023 showed that smaller U.S. banks suffered material net deposit outflows in March 2023, while the largest banks and money‑market funds recorded inflows—consistent with the “flight to safety” and “why take a chance?” behavior the prediction described.

Because (a) contagion fears did spread, (b) multiple regional banks experienced substantial deposit outflows, and (c) at least one major regional (First Republic) suffered a run severe enough to fail, the core substance of Sacks’s prediction—that in the days and weeks after SVB’s collapse, depositor flight would spread to other regional banks, causing significant cash outflows and runs at multiple institutions—is borne out by subsequent events.

Therefore the prediction is right.