Palmer Luckey's Erebor bank targets an $8 billion valuation.

      A bank that was virtually non-existent just a year ago is now pursuing a valuation that many European banks can only aspire to attain. Erebor, established by Palmer Luckey of Anduril and supported by Peter Thiel, is in negotiations to secure funding at a valuation of no less than $8 billion, with its deposits having nearly quadrupled over the last three months.

      This valuation would approximately double the $4.35 billion that Erebor was valued at late last year, as reported by Bloomberg, which was the first to break the news of these discussions. The company has opted not to comment, and the negotiations are still in their initial stages.

      Nonetheless, the growth is substantial. Erebor's deposit base has surged from $1.1 billion in late March to $4.05 billion today, and the bank has gained nearly 400 new customers within three months. It anticipates achieving profitability by the end of the year. This is quite impressive for a bank that only acquired its charter in February.

      Filling the Gap Left by SVB

      Erebor derives its name from the treasure mountain featured in Tolkien’s The Hobbit. The bank aims to attract customers left in a lurch following the collapse of Silicon Valley Bank in 2023. It focuses on two industries that resonate closely with Washington: defense technology and cryptocurrency.

      According to Luckey, a significant portion of the growth stems from hard-tech and defense manufacturers, whom he describes as companies “rebuilding America’s industrial base.” Erebor provides them financing for equipment and venture debt and manages deposits and payments in dollar-backed stablecoins. However, the demand for crypto-backed lending has been lower than anticipated.

      Luckey is eager to counter any potential doubts. “Zero percent of Erebor’s deposit growth this quarter has come from my own companies,” he stated, adding that the rest consists of “hundreds of new customers opting for Erebor because they appreciate what we’ve established.”

      Rapid Charter Approval Raises Concerns

      The rapid pace of Erebor’s development has sparked some scrutiny. It was the first bank to receive a national charter during President Trump’s second term, with regulators approving it within months. Senator Elizabeth Warren has expressed “serious concerns,” questioning whether the political connections of the founders facilitated the swift approval process.

      Erebor’s investors resemble a map detailing the emerging Washington-Silicon Valley partnership, featuring Thiel’s Founders Fund, Andreessen Horowitz, 8VC, and Lux Capital. This group is also known for financing defense startups, reflecting the close ties between technology and government, as evident by Marc Andreessen’s position on the Pentagon’s board.

      The bank is also venturing into more precarious territories, having formed a preliminary agreement with Banco de Venezuela to offer correspondent banking services. This marks a presence in a country still under U.S. sanctions. Luckey's ambitions in finance continue to expand; reports from Politico reveal he is one of the angel investors supporting a new U.S. perpetual-futures exchange.

      For a founder predominantly recognized for drones and a $61 billion valuation in defense, transitioning to banking is quite unusual. Yet, with stablecoins and defense financing gaining popularity, Erebor has capitalized on favorable timing and circumstances.