Erebor Sees Valuation for Tech-Focused Bank Hit $4.35 Billion

Silicon Valley-focused banking startup Erebor Bank is expected to raise $350 million, Bloomberg reported Tuesday (Dec. 23).

The funding round would value Erebor at $4.35 billion, according to the report, which cited unnamed sources.

Backed by billionaire Peter Thiel and named for the dragon-guarded mountain of treasure in “The Hobbit,” Erebor Bank has positioned itself as a potential replacement for Silicon Valley Bank, the report said. That lender, which collapsed in 2023, had counted many crypto and tech companies among its clients.

At the same time, Erebor is pushing into the defense and aerospace sectors. Its co-founder, Palmer Luckey, is CEO of Anduril Industries, another J.R.R. Tolkien reference, which builds technology for the American defense industry.

Erebor’s ambitions were first reported in July, as the startup began positioning itself as a go-to financial institution for riskier companies and crypto firms that traditional lenders might otherwise reject.

“The bank will be a national bank . . . providing traditional banking products, as well as virtual currency-related products and services, for businesses and individuals,” Erebor said in its application for a banking charter.

The filing went on to say that the bank would “differentiate itself” by conducting business with customers that “are not well served by traditional or disruptive financial institutions, in particular with respect to insufficient access to credit.”

Erebor last week received approval from the Federal Deposit Insurance Corp. to receive deposit insurance coverage. In October, it won conditional approval from the Office of the Comptroller of the Currency on its de novo national bank charter application.

The FDIC set conditions for Erebor, requiring the bank to establish protocols to comply with the FDIC’s regulations regarding processing of deposit accounts in the event of a bank failure, and maintain a minimum 12% tier 1 leverage ratio during its first three years of operation.

If the bank ceases to be considered “well capitalized” or drops below the minimum capital levels required by its primary federal regulator, Erebor is required to exercise its rights under its Capital Call Agreement to garner the amount of capital necessary to be considered “well capitalized,” the FDIC said.

As for OCC, Comptroller of the Currency Jonathan V. Gould said at the time that the approval showed his commitment to “a dynamic and diverse federal banking system,” while offering proof that the OCC under his leadership “does not impose blanket barriers to banks that want to engage in digital asset activities.”