A group of prominent billionaires, including PayPal co-founder Peter Thiel, is reportedly spearheading the launch of a new financial institution aimed at supporting startups and cryptocurrency firms: two sectors hit hard by the 2023 collapse of Silicon Valley Bank (SVB).

A report by the Financial Times said the bank, which would be named Erebor, has filed an application to obtain a U.S. banking license and would focus particularly on early-stage firms and digital asset projects that struggle to find coverage at larger, more established banks. The report is based on unidentified sources that are conversant with the initiative.

Erebor Targets Startups Facing Capital Crunch

One of the initial investors is Thiel’s venture capital enterprise, Founders Fund. Other key participants are Anduril co-founder Palmer Luckey and 8VC founder Joe Lonsdale. Thiel, a cryptocurrencies supporter, is a member of the crypto exchange Bullish, which has just registered an initial public offering in the US.

Erebor allegedly is planning to become a primary lender on risky startups businesses which have been finding it tougher to raise capital following the tightened regulatory oversight on financial institutions.

Billionaire-Backed Erebor Bank Aims to Replace SVB

The project seems to be aimed at filling in the gap that occurred after the demise of SVB, which previously served approximately half of all venture-backed enterprises in the U.S. technology and life sciences industries.

SVB Collapse Triggered Wider Banking Crisis

The closure of SVB after interest rates hiked and a resultant lack of liquidity was the first instance of a FDIC-insured financial institution to go down in that year. The fallout caused ripple effects across the banking system, adding to the collapse of other banks, such as Silvergate Bank, Signature Bank, and First Republic Bank.

Billionaire-Backed Erebor Bank Aims to Replace SVB

The crypto industry was badly hit. An estimated 10 percent of assets managed by digital asset funds vanished in one week, reflecting how unstable banking can be to the industry.

Since its acquisition by First Citizens Bank in March 2023, SVB does not work independently anymore, but its operations are still carried out under this bank’s auspices. It specializes in serving the private-equity, tech, and life-science sectors.

The alleged launch of Erebor is a high-profile attempt to reconstruct financial infrastructure of the innovation economy and ensure that it is not subject to ripple effects of future banking meltdowns.