Shares in Silicon Valley Bank (SVB), a key lender to technology startups, plummeted as investors moved to withdraw their deposits, BBC reported.
The slide came after the bank announced a $1.75bn share sale to help shore up its finances. Shares in banks have fallen around the world - with the four largest US banks, including JP Morgan and Wells Fargo, losing more than $50bn in market value, BBC reported.
One venture capitalist said the day's events were "wild" and "brutal", BBC reported. On Friday, shares in Asian banks were also trading lower.
Shares in SVB saw their biggest one-day drop on record as they plunged by more than 60 per cent and lost another 20 per cent in after-hours trade, BBC reported.
The firm launched the share sale after losing around $1.8bn when it offloaded a portfolio of assets, mainly US Treasuries. But more concerningly for the bank, some startups who have money deposited have been advised to withdraw funds.
Reactions from venture capitalists
Hannah Chelkowski, founder of Blank Ventures, a fund that invests in financial technology, told the BBC the situation was "wild". She is advising companies in her portfolio to withdraw funds.
"It's crazy how it's just unravelled like this... The interesting thing is that it's the most startup friendly bank and supported startups so much through Covid. Now VCs are telling their portfolio companies to pull their funds," she said.
"It's brutal," she added. A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year, BBC reported.
In the wider market, there were concerns about the value of bonds held by banks as rising interest rates made those bonds less valuable.
Central banks around the world -- including the US Federal Reserve and the Bank of England -- have sharply increased interest rates as they try to curb inflation, BBC reported.
