Erebor, named after the dragon’s mountain hoard in “The Hobbit,” is a new banking startup model. It hopes to position itself to serve tech entrepreneurs and go all-in on cryptocurrency as it bursts through the gates into the financial mainstream. Erebor is supported by tech titans Palmer Lucky — the founder of defense contractor Anduril and of Oculus VR — and Joe Lonsdale from 8VC. Together, they are leading an incredible $225 million fundraising round to reimagine finance with a proven conservative hand and a focus on stablecoin deposits. The ecosystem-building venture comes on the heels of the implosion of Silicon Valley Bank. It is a new alternative to fractional reserve banking.

With the recent $225 million fundraising round, the company is looking to go public and satisfy federal regulatory requirements. This funding is extremely important for launching a new bank. This incredible capital infusion speaks volumes to just how ambitious the founders of Erebor intend to be. They are deeply committed to establishing themselves as a compliant, strong financial institution.

Palmer Luckey, the founder and creator of the Oculus VR headset is hailed as a hero and entrepreneurial genius. He’s had some success with Anduril, bringing useful entrepreneurial experience and financial firepower to the party. Forbes recently estimated Luckey’s net worth at $3.6 billion, a testament to his history of innovation and sharp business sense. Joe Lonsdale is a controversial figure even among the venture capital community. He is expected to take up a position on Erebor’s board, which should help bolster the startup’s strategic direction and leadership.

Erebor distinguishes itself by its intention to handle deposits in stablecoin, a type of cryptocurrency designed to maintain a stable value by being pegged to assets like the U.S. dollar. Erebor’s openness to the world of digital currency makes it an innovative institution, ready to meet a promising new technological frontier.

Erebor is poised to adopt a conservative balance sheet approach. They can set a maximum threshold for the loan-to-debt ratio, with a goal of no more than about 50%. This prudent stance is in sharp contrast to the reckless practices that led to the collapse of several conventional banks.

Erebor is focused mainly on helping tech entrepreneurs build their businesses. This targeted approach demonstrates a real dedication to driving innovation and building on the success of the technology sector.

Erebor presents a compelling alternative to fractional reserve banking as we know it. Opposite to that system, in which banks lend out most of their deposits, Erebor encourages a more prudent practice. Erebor seeks to create a more stable, transparent banking environment. They tout a highly conservative lending model and welcome the use of stablecoins.

The idea for Erebor came after the failure of Silicon Valley Bank in 2023. This event laid bare the vulnerabilities of our traditional banking system. It did reopen conversations about the urgent need for alternative financial institutions that can respond faster and serve our tech companies, innovators, and entrepreneurs better.

So the name on the map as “Erebor” is still very tentative and likely to change! It’s where, in J.R.R. Tolkien’s The Hobbit, the dragon Smaug hoarded his gold. This imagery conjures up an image of a fortress-like, highly prized and rare financial vault.