How Hobbit-inspired startup plans to replace Silicon Valley Bank
Backed by Palmer Luckey and other founders, a new bank named Erebor has earned a preliminary government approval.
When Silicon Valley Bank collapsed in 2023, it nearly took startup Anduril down with it. Ever since, the defense company’s co-founder, Palmer Luckey, has been building what he hopes can be a replacement.
Named Erebor, after the mountain where the dwarves stored their treasure and which the dragon took over in J.R.R Tolkien’s “The Hobbit," that new bank won a preliminary regulatory approval Wednesday.
The relatively quick approval will excite a wave of companies and startups that are seeking to become banks to serve clients that have struggled to get access to mainstream financial providers, especially technology and cryptocurrency firms. They have been cheered on by the Trump administration, which has promised a new openness from regulators.
Luckey and his collaborators plan to focus the bank’s business on loans and depository services to much of the same clientele as Silicon Valley Bank, according to people familiar with the matter. That could include technology companies in cryptocurrencies, artificial intelligence and defense and manufacturing, as well as investment funds and ultrahigh-net-worth individuals that hold crypto, according to the bank’s charter application.
The bank plans to build infrastructure that will allow customers to make payments with stablecoins, a cryptocurrency tied directly to a fiat currency such as the U.S. dollar, the people said. (It doesn’t plan to issue its own stablecoins, they said.)
The focus on what is called the innovation economy and stablecoins puts the bank in a milieu of new entrants into the financial system—crypto and crypto-adjacent companies that are seeking to change the financial system from the inside rather than from the outside, in the words of one of the bank’s board members.
The Trump administration has pledged to support the cryptocurrency industry after crypto advocates poured tens of millions of dollars into President Trump’s campaign. On Wednesday, the head of the national bank regulator, the Office of the Comptroller of the Currency, pointed to the preliminary approval of Erebor as a demonstration of the agency’s new stance.
“Today’s decision is…proof that the OCC under my leadership does not impose blanket barriers to banks that want to engage in digital asset activities," Comptroller of the Currency Jonathan Gould said.
Erebor, which has raised $275 million, is backed by a number of investors in Peter Thiel’s circle, including Luckey, Palantir co-founder Joe Lonsdale’s 8VC and Thiel’s Founders Fund. Other investors include Haun Ventures, which focuses on crypto, Bain Capital Crypto, the blockchain arm of the private-equity firm, venture firm Lux Capital and 776, a VC firm founded by Reddit co-founder Alexis Ohanian.
Despite modeling itself in some ways after Silicon Valley Bank, Erebor’s founders are trying to avoid some of the missteps that brought down the California-based bank.
Erebor plans to avoid risk from interest-rate fluctuations by investing in short-term Treasury securities and other highly liquid government bonds, according to the people familiar with the matter. It also plans to hold a relatively conservative 50% loan-to-deposit ratio, they said. And it will skip the luxury perks such as courtside tickets Silicon Valley Bank used to treat clients.
“We’re building a bank, not a social club," Luckey said.
Luckey won’t have an operating role in the new bank, but he will serve on the board. In filings, he was listed as the bank’s principal shareholder.
Luckey first rose to prominence as the co-founder of Oculus, the VR headset maker that Facebook bought in 2014. He was one of the few public supporters of Trump in Silicon Valley during the 2016 election, which he told people led to his ouster from Facebook. He was a significant donor to Trump’s 2024 campaign.
Erebor’s preliminary approval marks a shift in how regulators handle the bank-chartering process, according to lawyers who advise on it. Before, obtaining a preliminary approval was a lengthy process that virtually guaranteed final approval.
Now, the OCC has told applicants that it will attempt to grant conditional approvals within 120 days, after which applicants must work to raise capital and build the risk-management systems necessary to obtain final approval, said David Portilla, a partner at law firm Davis Polk & Wardwell.
“What they want to do is get people up and running to start building the bank, rather than precluding people at the front end," Portilla said. “That will encourage bank formation," which Trump officials view as good for competition and the economy, he said.
The speed of the approval fueled questions from Sen. Elizabeth Warren (D., Mass.).
“President Trump’s billionaire buddies Peter Thiel and Palmer Luckey just received approval from the OCC to launch a new bank that will cater to the financial whims of Silicon Valley billionaires," Warren said. “Trump’s financial regulators just fast tracked an approval of this risky venture that could set up another bailout funded by American taxpayers and destabilize our banking system."
Write to Keach Hagey at Keach.Hagey@wsj.com and Dylan Tokar at dylan.tokar@wsj.com
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