Palmer Luckey, Peter Thiel, and Joe Lonsdale are creating Erebor, a new digital bank specifically for crypto companies, startups, and defense contractors. They’ve filed for a national bank charter and want to raise $250 million at a $2.25 billion valuation.
The main reason they chose to do it now is that Silicon Valley Bank collapsed in March 2023, leaving thousands of startups without a banking partner. When $42 billion fled SVB in a single day, nearly half of all venture-backed tech companies lost their primary bank. The founders saw a great chance to fill this massive gap.
Erebor will operate entirely online from Columbus, Ohio, with a second office in New York. The bank targets businesses that regular banks won’t touch – AI companies, crypto firms, defense contractors, and manufacturers. Jacob Hirshman (former Circle advisor) and Owen Rapaport (from Aer Compliance) will run the bank as co-CEOs, while Mike Hagedorn from Valley National Bank serves as president.
Erebor stands out by holding stablecoins directly and offering loans backed by crypto assets. Businesses can deposit U.S. dollars, convert them into stablecoins, and send payments worldwide almost instantly, eliminating the delays of the traditional SWIFT network. For asset management, the bank uses advanced crypto wallets featuring multi-signature security and hardware-level protection, offering a level of safety that conventional banks typically lack.
The timing seems to be good. The stablecoin market has grown to $150 billion and is expanding 30% yearly. President Trump’s administration just passed the Genius Act, setting clear rules for stablecoins. Bitcoin keeps hitting new highs, though. Regular banks still avoid this field, leaving room for Erebor to take action and dominate.
The market desperately needs such a service. Most venture capital firms manage just $56 million in assets, with many earning under $1 million annually. All these smaller players need specialized banking that understands their problems. International startups also struggle – Chinese companies previously used SVB for its easy account setup and transparency features. Erebor plans to serve these foreign firms seeking U.S. dollar accounts.
SVB failed because it made some terrible risk-dealing decisions. The bank loaded up on long-term securities without hedging against rising interest rates. Erebor’s founders learned from these mistakes, focusing on strict compliance and conservative balance sheet management.
If regulators approve Erebor’s charter, it could trigger a wave of similar tech-focused banks. Look at fintech success stories such as Stripe ($100+ billion valuation) and Revolut ($33 billion) – the market wants such innovative financial services.
The name continues the founders’ Tolkien obsession, joining Anduril, Palantir, and Mithril Capital. But unlike the fictional mountain kingdom destroyed by a dragon, Erebor Bank is set to build something lasting in that sphere.
This venture is following a much bigger trend – combining fintech, crypto, and Web3 into compliant, user-friendly services. If Erebor succeeds, it could become the blueprint for serving high-growth, high-risk sectors that push innovation to a higher level.
