Erebor Bank Launched by Tech Billionaires to Fill SVB Void

Erebor, a new bank, has been established in response to the collapse of Silicon Valley Bank (SVB) in March 2023. This event disrupted funding for start-ups and the broader innovation economy. The new bank is backed by prominent tech billionaires, including Peter Thiel, and aims to fill the void left by SVB.

Erebor was founded by Palmer Luckey, the creator of defence contractor Anduril, and Joe Lonsdale, a venture capitalist and co-founder of Palantir. The bank has applied for a national charter and plans to serve tech businesses focused on artificial intelligence, crypto, defence, and manufacturing, as well as the individuals who work at or invest in them.

Thiel’s Founders Fund is among the investors in Erebor. The firm’s formation is a direct response to the collapse of SVB, which left a significant gap in the financial ecosystem for early-stage tech firms and venture capitalists. While SVB’s assets were acquired by First Citizens and its bankers moved to new institutions, many start-ups still face difficulties securing credit under the more risk-averse models of traditional banks.

Erebor aims to provide traditional banking products, as well as virtual currency-related products and services, for businesses and individuals. The bank will operate entirely digitally, with all customer interactions and services delivered through its app and website. It will be headquartered in Columbus, Ohio, with a secondary office in New York.

Stablecoins are expected to be a core focus for Erebor, with the bank aiming to become “the most regulated entity conducting and facilitating stablecoin transactions.” The application for the bank’s charter outlines plans to support non-US firms seeking access to the US banking system and to offer credit to businesses often overlooked by both traditional and disruptive financial institutions.

Peter Thiel and Founders Fund have long been iconic forces in Silicon Valley, with a portfolio that includes some of the most transformative tech companies. Their backing gives Erebor strong credibility among tech investors and founders. However, Luckey and Lonsdale are not expected to take on operational roles. Instead, Erebor will be led by co-CEOs Jacob Hirshman and Owen Rapaport, with Mike Hagedorn serving as president.

Erebor’s formation highlights the ongoing need for specialized financial services in the tech and innovation sectors. The bank’s focus on cutting-edge technologies and its digital-only operation model position it as a potential leader in the evolving financial landscape. However, key parts of the application, including financials and ownership details, remain undisclosed.