It was a bad day for the banking industry Thursday. The benchmark KBW Bank Index tumbled as much as 8.1% in its biggest one-day decline since June 2020. The biggest loser in that index was SVB Financial Group, the parent of Silicon Valley Bank, which plunged 60%. It’s not that Silicon Valley Bank was down in sympathy with JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.; those banking behemoths — and arguably the stock market as a whole — dropped because of Silicon Valley Bank. Wait. Silicon Valley who?

The Santa Clara, California-based bank isn’t exactly a household name, and it’s certainly not big enough to spark a national banking crisis. With around $212 billion in assets, it’s less than a tenth the size of JPMorgan. In fact, it has a very niche business, which is mainly financing technology-related startups.

Therein lies the problem. Silicon Valley Bank’s parent surprised the market late Wednesday by saying it had sold about $21 billion of securities from its portfolio, which will result in an after-tax loss of $1.8 billion for the first quarter. SVB also sold $1.25 billion of common stock and $500 million of securities that represent convertible preferred shares. Plus, General Atlantic committed to purchase $500 million of common stock, taking the total amount being raised to about $2.25 billion.

To be clear, having to raise money on short notice is never a good look for a bank. But what seemed to surprise everyone is the reason SVB gave for needing to raise capital: those startups with deposits at the bank are pulling cash out. That makes sense. Venture capital funding has dried up as the Federal Reserve’s aggressive interest-rate increases make investors more circumspect, particularly amid concerns that the economy will inevitably be pushed into a recession. Such funding fell 35% last year, according to venture capital firm Partech Partners.

According to Bloomberg News, SVB does business with almost half of all US venture capital-backed startups, and 44% of US venture-backed technology and health-care companies that went public last year. Those sectors have been ravaged as rate hikes enacted to combat inflation tank valuations and force companies to search for cash, Bloomberg News notes. “We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash-burn levels from our clients as they invest in their businesses,” SVB Chief Executive Officer Greg Becker said in a letter to shareholders Wednesday.

It’s hard to overstate just how important the technology and startup industries have been to the economy. Before the recent turmoil in markets, the value that startups created globally was almost on par with the gross domestic product of a Group of 7 economy, and the amount of startup funding in 2021 surpassed $600 billion worldwide, according to a World Economic Forum report from last year.

The NYSE FANG+ Index, which tracks the performance of such bellwether tech companies as Meta Platforms Inc., Apple Inc., Inc., Netflix Inc. and Google parent Alphabet Inc., soared more than 700% between 2016 and late 2021, dwarfing the 150% gain in the S&P 500 Index. Since then, the NYSE FANG+ Index is down about 32%. Job cuts in the industry are adding up. Challenger, Gray & Christmas said Thursday that announced workforce reductions in the tech sector totaled 20,442 in February, far surpassing the sector that came in second; retail at 8,544.

Despite benchmark interest rates going from near zero last March to 4.75% today, the economy has been able to avoid falling into a recession like most everyone expected. Perhaps Silicon Valley Bank’s troubles are the first sign that a recession has arrived. In that sense, it’s no wonder this bank has everyone spooked.    

Robert Burgess is the executive editor of Bloomberg Opinion. Previously, he was the global executive editor in charge of financial markets for Bloomberg News.