America's 16th-largest bank has seen 60% of its shares plunging on Friday, making it the second largest bank failure in US history following the great market collapse of 2008, prompting regulators to seize its assets and halt trade on its stocks in Nasdaq, AP reported on Saturday.

Despite scrambling to allocate funds or find a buyer, the bank's failure to do so unleashed public panic.

Releasing a bid to sell $2.25 billion in shares last Wednesday, Silicon Valley Bank (SVB) attempted to close a gap in its balance sheet of $1.8 billion dollar, which was the result of the $21 billion sale of a portfolio holding mostly US treasuries at a 10-year 1.79% yield, vastly below the current treasury rates at 3.9%.

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As depositors rushed to withdraw their money following the news, SVB tried to reassure its clients of its solid finances, but that did not stop over $80 billion in shares value from being slashed within 48 hours followed by a free fall of its stock values until their trade was halted.

“SVB’s condition deteriorated so quickly that it couldn’t last just five more hours,” said CEO of Better Markets Dennis M. Kelleher. “That’s because its depositors were withdrawing their money so fast that the bank was insolvent, and an intraday closure was unavoidable due to a classic bank run.”

The bank, which is one of the main lenders and a partner to technology and healthcare startups that went public in 2022 - including well-known firms - has sent the early-stage tech companies in a spiral.

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According to the bank's website, almost half of the 2022-listed startups that received early funding from venture capitalists in these sectors were its clients.

Garry Tan, chief of Y Combinator, a startup business incubator that launched DoorDash, Airbnb, and Dropbox, who has introduced hundreds of entrepreneurs to SVB, described the collapse as an "extinction-level event for startups.”

“I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, ‘Do I have to furlough my workers?’”

Around one-third of startups backed by Y Combinator might not be able to afford wages in the coming month if they have no access to their deposits, Tan believed.

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Roku, a well-known internet TV provider, was among the clients impacted by SVB's failure. Nearly 26% of its liquidity, at around $487 million, was deposited in the bank, the company said on Friday, adding that it does not know "to what extent" it would be able to recover them as most were not insured.

The California Department of Financial Protection and Innovation (CDFPI) and the Federal Deposit Insurance Corp (FDIC) relocated SVBs assets - worth nearly $175 billion - to a newly established institution - the Deposit Insurance Bank of Santa Clara - which will be responsible for paying out clients with insured deposits on Monday, while the remaining assets will be auctioned to pay other depositors.

The banking sector, which was already witnessing a tumble in its stocks this week, was hit hard by the news, sending its shares even lower on Friday.

Trying to assure markets, Cecilia Rouse, head of the White House Council of Economic Advisers, said the banking system currently is in a much better state than it was in 2008.

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“Our banking system is in a fundamentally different place than it was, you know, a decade ago,” she said. “The reforms that were put in place back then really provide the kind of resilience that we’d like to see.”

The White House also said that Treasury Secretary Janet Yellen was “watching closely".

Wally Adeyemo, Deputy Treasury Secretary, also made a statement to reassure the markets.

“Federal regulators are paying attention to this particular financial institution and when we think about the broader financial system, we’re very confident in the ability and the resilience of the system,” told CNN in an exclusive interview. “We have the tools that are necessary to [deal with] incidents like what’s happened to Silicon Valley Bank."

The CEO of TWG Supply in Grapevine, Texas, noted that he first sensed that something unusual was going on with the bank when his 18 employees reached out to him at 6:30 am Friday to ask him why their salaries have not been out yet.

Bill Tyler said the money for the paychecks had been already transferred to a payroll services provider that was a client of Silicon Valley Bank.

“We’re waiting on roughly $27,000,” Tyler said. “It’s already not a timely payment. It’s already an uncomfortable position. I don’t want to ask any employees, to say, ‘Hey, can you wait until mid-next week to get paid?’”

The bank's close ties to the tech industry hit hard the sector that has been already struggling for over a year, witnessing mass layoffs in recent months.