It's business 101 that you need a diversified customer base. If you're too heavily concentrated in one industry, you're entirely exposed to any downturn in that industry.
In this case, things were made even worse since SVB's customers were VC-funded startups, and VCs have an outsized say in the decisions made by VCs. Particularly in 2023 when we've seen startups shed more and more equity to VCs.
If I was running a business similar to SVB, I would have asked myself if I was too over-exposed to VC-funded startups, and if those VCs were always going to play nice.
The failure of SVB had nothing to do with extending loans to their client base.