BY Fast Company 2 MINUTE READ

Shares of SVB Financial Group nosedived Thursday, falling more than 60% as the tech-focused bank attempted to shore up its balance sheet, igniting fears about its liquidity. Trading was halted several times on the stock, and some of the largest venture capital firms were advising portfolio companies to move their money out of the bank. (Shares continued to decline, though in a much smaller percentage, in after-hours trading.)

Shares closed at $106.04 Thursday, down from a close of $267.83 on Wednesday and a 52-week high of $597.16. It was a swift and sudden drop for the bank, which saw its market cap fall below $6.25 billion, catching many investors and customers off guard. Here’s what sparked the sell-off.

Why did SVB shares fall so sharply?

Late on Wednesday, the bank announced it was hoping to raise $2.25 billion via a stock sale and investments, in order to strengthen its balance sheet, as deposits from startups struggling for funding have dropped in recent months. To achieve that, it sold $1.75 billion worth of its available-for-sale securities. In addition, equity fund General Atlantic committed to invest $500 million in the bank. That set off a panic among investors.

Why is SVB so important?

The bank is the financial partner of nearly half of the U.S.’s venture-backed startups in the healthcare and technology space that went public last year. Those companies are working through their cash reserves at a tremendous rate right now, and ongoing higher interest rates have made many VCs hesitant to give more. CEO Greg Becker, in a letter to investors, said cash burn by clients increased in February and noted it might not be easy to get access to venture capital funding for the short term.

How has the VC world reacted?

Not well. TechCrunch reports that founders say they were advised by two venture investors to pull their money from SVB. And it quotes a memo from a partner in one fund telling portfolio companies that she “does not want to create panic” but suggested banks for them to begin opening new accounts.

Does this mean SVB is about to become insolvent?

That fear is part of what’s driving the panic, but Becker has tried to calm investors down, saying in his letter, “We are experienced at navigating market cycles and are well positioned to serve our clients through market volatility, with a high-quality, liquid balance sheet and strong capital ratios.” That didn’t ebb the concern, though.

Late Thursday, prominent VC Mark Suster came to Becker’s defense, tweeting, “I believe their CEO when he says they are solvent and not in violation of any banking ratios & goal was to raise & strengthen balance sheet.” A ‘run on the bank,’ he said, would be the biggest risk to both startups and VCs.

“I know some have already withdrawn money. I know some are advising this. I know it’s scary,” he wrote. “More VCs need to speak up. It doesn’t matter exactly what banking solutions are chosen—what matters is that we don’t have or create mass hysteria.”

On Friday regulators decided to close the bank.

(This is a developing story)