5 ms·

Why?? Banks are VERY safe.

Why?? Banks are *VERY* safe.

ceejayoz 4y ago
Bank collapses cause disruption, and potential loss of balances over the FDIC limits. A well-funded startup really doesn't want their money in a failing bank.
shadowofneptune 4y ago
Looking at the FDIC website: > The FDIC does NOT cover (even if purchased at an insured bank): Stock investments Bond investments Mutual funds Life insurance policies Annuities Municipal securities Safe deposit boxes or their contents U.S. Treasury bills, bonds or note This article is about the bank's investments, if I read it correctly. Safe for a household does not mean safe for a company that lives on investment money.
- ceejayoz 4y ago
  There's an equivalent for securities, the SIPC. It's capped like FDIC insurance is, but bonds/stocks have some protection in this regard. https://en.wikipedia.org/wiki/Securities_Investor_Protection_Corporation https://en.wikipedia.org/wiki/Securities_Investor_Protection...
  - shadowofneptune 4y ago
    Ah, I see. Looks like it still only has a limit of 250,000 USD, which seems low for modern business. How far would that get some of these companies?
- slg 4y ago
  Aren't most (all?) of those clearly owned and register to the individual regardless of which bank holds them? If the bank holding my stock goes out of business, it is still my stock. It doesn't just evaporate with the bank unless there is some fraud involved. Some other bank will swoop in to buy those accounts and my stock will move there. The main concern here is likely less about straight-up losing any of those investments and more the huge headache that comes with being unable to access your money while the whole process plays out.
- iancarroll 4y ago
  The bank can take your cash deposits and invest them, which is the problem occurring with SVB. In this case, your deposits are still insured via FDIC. If you buy investment products from a bank, and they hold those for you, those are not insured via FDIC.
ender341341 4y ago
Speed, if all your money disappears tomorrow you may miss payroll while you're waiting for the FDIC to get you your money.
- jhallenworld 4y ago
  There is a legal process to get your money, so you can guess that this is not going to be quick. I remember stories about this after 2008.
UncleOxidant 4y ago
One can imagine that a startup might have more than the $250K FDIC limit in the bank. I think that's what they're being advised of: Get under the $250K limit ASAP.
- orangepurple 4y ago
  Also multiple banks might be under one FDIC account so you have to check that too
gumby 4y ago
Most portfolio companies have more than the FDIC limit. My preference is to have 2-3 months in cash, the rest in commercial paper (which would not be threatened by the bank failure, but did "break the buck" in 2008). In the early stage 2-3 months of cash is much less than the FDIC limit, but later on that could change. I've been using SVB since the mid 90s, but most recently chose First Republic instead. FR poached some of the great SVB people anyway so it wasn't a huge change. FWIW, SVB got into trouble in the 80s due to their real estate practice. They stuck to their knitting after that (except they kept their wine practice, which is small and I guess amusing) so I find this situation rather interesting.
- jbverschoor 4y ago
  You mean the great people who moved to FR poached you away ;)
capableweb 4y ago
Well, they're safe until they aren't. Bank runs have happened, and more of them will in the future. Nothing is 100% although using banks is probably the safest storage for funds, if you compare...
drewda 4y ago
In September 2008, I was in Amsterdam for a conference. I remember waking up and seeing a TV in the hotel lobby with the cable news headline about the receivership of Washington Mutual. It was a little bit of a strange feeling to realize that when I had left California I had personal and business accounts with WaMu — and when I returned to the US, my accounts were all with Chase. For what it's worth, it was a seamless transition. I don't remember any hiccups with accessing cash, using debit cards, and so on.

Why?? Banks are *VERY* safe.

Bank collapses cause disruption, and potential loss of balances over the FDIC limits. A well-funded startup really doesn't want their money in a failing bank.

shadowofneptune 4y ago

Looking at the FDIC website: > The FDIC does NOT cover (even if purchased at an insured bank): Stock investments Bond investments Mutual funds Life insurance policies Annuities Municipal securities Safe deposit boxes or their contents U.S. Treasury bills, bonds or note This article is about the bank's investments, if I read it correctly. Safe for a household does not mean safe for a company that lives on investment money.

ceejayoz 4y ago
There's an equivalent for securities, the SIPC. It's capped like FDIC insurance is, but bonds/stocks have some protection in this regard. https://en.wikipedia.org/wiki/Securities_Investor_Protection_Corporation https://en.wikipedia.org/wiki/Securities_Investor_Protection...
- shadowofneptune 4y ago
  Ah, I see. Looks like it still only has a limit of 250,000 USD, which seems low for modern business. How far would that get some of these companies?
slg 4y ago
Aren't most (all?) of those clearly owned and register to the individual regardless of which bank holds them? If the bank holding my stock goes out of business, it is still my stock. It doesn't just evaporate with the bank unless there is some fraud involved. Some other bank will swoop in to buy those accounts and my stock will move there. The main concern here is likely less about straight-up losing any of those investments and more the huge headache that comes with being unable to access your money while the whole process plays out.
iancarroll 4y ago
The bank can take your cash deposits and invest them, which is the problem occurring with SVB. In this case, your deposits are still insured via FDIC. If you buy investment products from a bank, and they hold those for you, those are not insured via FDIC.

ender341341 4y ago

Speed, if all your money disappears tomorrow you may miss payroll while you're waiting for the FDIC to get you your money.

jhallenworld 4y ago
There is a legal process to get your money, so you can guess that this is not going to be quick. I remember stories about this after 2008.

UncleOxidant 4y ago

One can imagine that a startup might have more than the $250K FDIC limit in the bank. I think that's what they're being advised of: Get under the $250K limit ASAP.

orangepurple 4y ago
Also multiple banks might be under one FDIC account so you have to check that too

gumby 4y ago

Most portfolio companies have more than the FDIC limit. My preference is to have 2-3 months in cash, the rest in commercial paper (which would not be threatened by the bank failure, but did "break the buck" in 2008). In the early stage 2-3 months of cash is much less than the FDIC limit, but later on that could change. I've been using SVB since the mid 90s, but most recently chose First Republic instead. FR poached some of the great SVB people anyway so it wasn't a huge change. FWIW, SVB got into trouble in the 80s due to their real estate practice. They stuck to their knitting after that (except they kept their wine practice, which is small and I guess amusing) so I find this situation rather interesting.

jbverschoor 4y ago
You mean the great people who moved to FR poached you away ;)

capableweb 4y ago

Well, they're safe until they aren't. Bank runs have happened, and more of them will in the future. Nothing is 100% although using banks is probably the safest storage for funds, if you compare...

drewda 4y ago

In September 2008, I was in Amsterdam for a conference. I remember waking up and seeing a TV in the hotel lobby with the cable news headline about the receivership of Washington Mutual. It was a little bit of a strange feeling to realize that when I had left California I had personal and business accounts with WaMu — and when I returned to the US, my accounts were all with Chase. For what it's worth, it was a seamless transition. I don't remember any hiccups with accessing cash, using debit cards, and so on.