A start-up bank backed by prominent Silicon Valley tech investors is closing in on about $1.5bn of new funding, underscoring its rapid growth since receiving regulatory approval to operate just months ago. Erebor, which was founded with an aim to fill the gap left by the collapse of Silicon Valley Bank, is in advanced talks to raise the new funding at an $8bn valuation before taking the new cash into account, according to people familiar with the matter. Investors including venture capital groups Lux Capital, Human Capital, Valor Equity Partners, Andreessen Horowitz and Ron Conway’s SV Angel are set to make significant commitments in the round, the people said. The deal faced high demand and could be finalised within the coming weeks, the people added.

Erebor has been backed by prominent figures and was founded by Palmer Luckey, the entrepreneur behind military contractor Anduril. The firm’s existing investors, including Joe Lonsdale’s 8VC and Haun Ventures, will continue to back the company in the latest deal, which marks a steep uptick in valuation. Erebor raised funding at a $4.35bn valuation earlier this year. Erebor’s co-founders decided to launch a bank after the 2023 collapse of Silicon Valley Bank, which had been the main lender for US tech start-ups and their venture capital backers. The firm received final regulatory approval in February and since then has seen its deposits surge to $4.6bn through the end of July, according to a person familiar with the figures.

Erebor has already surpassed $100mn of annualised recurring revenue, the person added, with board members joining such as former US official Michael Mosier and former American Express executive Anré Williams. The bank has found success by financing companies that are part of a new, capital-intensive wave of innovation across sectors including energy and defence, such as financing nuclear start-up Valar Atomics.“There’s this reindustrialisation of the US, where you have these companies that are going to need a financial partner that really understands how they work,” said one investor in the company.

Another investor added that Erebor was rare for its ability to grow and raise new funding so quickly. The person added that it also faced an opportunity from the expansion of private markets, where start-ups are delaying public offerings. The firm “want[s] to be a globally systematic important bank . . . they’re doing marquee deals,” the investor added. Erebor said in a filing last year that its target market would be businesses that were part of the US “innovation economy”, in particular tech companies focused on virtual currencies, AI, defence and manufacturing. It would also aim to service individuals who work for or invest in these companies. Erebor’s name is a reference to the fantasy world of JRR Tolkien. Erebor is the “lonely mountain” whose treasures are reclaimed from the dragon Smaug in The Hobbit. The bank is headquartered in Columbus, Ohio.