[This post first appeared on MusicTech.Solutions]

“It’s the economy as a whole,” Ashley Tyrner said. “It’s not just that they made investments that went the wrong way. It’s also that VCs are not writing checks to startups and deposits are not coming into the bank. So that’s the bigger piece here than just that they made a bad investment. They’re not getting deposits because venture capital is not funding startups like they were two years ago.”

The first time I ran across Silicon Valley Bank I thought it was a little too good to be true. When I met executives from SVB it was very much like the Harvard MBAs in the mail room at one of the big Hollywood talent agencies. A little too well groomed, a little too nice a car, a little too networked. And making deals that really made no sense other than keeping Sandhill Road happy.

Startups would end up with a perk-filled banking relationship and a multimillion dollar credit line with no top line revenue. And the so-called CFOs would promptly draw down that credit line (a secured credit line by the way) with no idea how it would ever be repaid. Even if the startup IPOd it probably would just rolled over into an even bigger credit line.

I don’t know if she realized what she was saying, but Ashley Tyrner described it perfectly. The VCs are cutting back on startup investing and “deposits are not coming into the bank”–to pay for those multimillion credit lines and the bridges to nowhere. No new money coming in to pay off the old commitments…sound familiar Mr. Madoff?

The reality is when the “risk free” interest rate on government bonds is approaching 5% with all signs pointing to a significant recession in our future, investors are not clamoring for a frothy return as they were even a year ago, certainly two years ago.

So that’s just about right–the smart money starting pulling back right about two years ago. Remember, the venture funds are limited partnerships. When you hear that a venture fund has “raised” X billion, that means that they have funding commitments for X billion. They actually get that money through “capital calls” when their limiteds have to actually pony up. And sometimes–like in the Dot Bomb meltdown–limiteds tell them to F right the F off because their kids are going to college thank you very much. They won’t burn any more money on the Silicon Valley feeding frenzy.

The next Elizabeth Holmes is not going to get billions thrown at her. And that means that for some institutions in Silicon Valley, the music just stopped.