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Ask HN: How is the SVB situation affecting your startup?
It's no news that Silicon Valley Bank is experiencing some trouble.
Since most startups in the US bank with them, would you like to share some details of your current situation?
- gerad 4y agoSince yesterday afternoon, I’m unable to log in to the website and the mobile app is down. I haven’t had to make any transfers yet, but I’m hoping and expecting that will still work.
- hkhanna 4y agoPersonally, I don't think there's a real problem unless everyone panics. Banks are well-regulated and stable and have been for decades. That said, my investors & cofounder have both expressed gratitude that our startup banks with Mercury and not SVB.
- nico 4y ago> Personally, I don't think there's a real problem unless everyone panics. And everyone is panicking. Your words are almost the same as what the CEO of SVB said, and then immediately the VCs panicked, telling their portfolio companies to withdraw from SVB.
- lotsofpulp 4y agoTechnically, you are not “banking” with Mercury: > Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.
- ensignavenger 4y agoMercury has partner banks though, so you are still banking, just through an intermediary. The banks still hold the funds. (Depending on the product you use).
- paraselene_ 4y agoOn that note, what's the deal with Evolve? I've seen them being the banking service provider for quite a few fintech companies already like Transferwise and BlockFi and else?
- raesene9 4y agoWhilst banks may have lots of regulations (depending on their country of operation), banks do fail reasonably regularly. For example this list of US bank failures https://en.wikipedia.org/wiki/List_of_largest_U.S._bank_failures https://en.wikipedia.org/wiki/List_of_largest_U.S._bank_fail...
- mikeyouse 4y agoThis seems to reinforce the 'don't panic' aspect though -- depositors have never lost FDIC insured funds in the ~90 years it's been operating. And none of the depositors in the list of failed US banks lost a penny either.
- paulette449 4y agoAlmost all banks on that list failed during the aftermath of Black Monday (1987) or during the Great Financial Crisis (2007-2010).
- raesene9 4y agoYep banks that took on excessive risk in times of expansion.... And as SVB has failed today as has Silvergate recently, it seems we are looking at some level of issue.
- more_corn 4y agoEveryone panicked yesterday.
- sdfghswe 4y agoWhat do you mean, there isn't a real problem? It's already been shut down.
- hkhanna 4y agoI was obviously very wrong. I've never had an HN comment age so poorly, so fast.
- dredmorbius 4y agoNB: Life lesson here is that a pretty reliable indicator of a crisis situation is when you keep mis-assessing the situation. The ground truth is either changing far faster than you can keep up with it, or conditions are well outside any of your expectations or experience. Or that the story / narrative / signals simply aren't coherent or consistent. This is something I've noted in a number of different situations --- not just business or financial situations, though those would be among them.
- danpalmer 4y agoStripe Atlas has supported SVB accounts for a while. I believe it may have been the only bank account supported at the beginning, but regardless, I suspect there are a lot of Atlas companies backed by SVB accounts.
- welder 4y agoOnly for C-Corps, LLCs created with Atlas never used SVB.
- more_corn 4y agoOh man, nobody should ever use Stripe Atlas.
- samwillis 4y agoI'm interested to hear why?
- danpalmer 4y agoI've seen Atlas get some flack from people who expected it to be an all-in-one business product, and then got bitten when it turns out there are more responsibilities/costs/etc that come along with running a business. I think if you take it as an automation product it's fine. Not sure if this is what was being referred to above though.
- hugs 4y agoNo plans to move money out. But definite plans to create a new, additional account elsewhere and when payment for current orders in process comes in over the next 30 to 60 days, have those new funds go into the new account. (Basically, diversifying is good, and I shoulda/woulda/coulda done it sooner, but it was never my top priority... until now.)
- PaulHoule 4y agoOdds are the San Francisco Fed has been working overtime since last night and announce SVB is bought out by another bank this weekend.
- eqmvii 4y agoCNBC this morning has had a few chirons implying private capitalization/sales talks have failed edit: maybe just the raise, and sales talks continue? https://www.cnbc.com/2023/03/10/silicon-valley-bank-financial-in-talks-to-sell-itself-after-attempts-to-raise-capital-have-failed-sources-say.html https://www.cnbc.com/2023/03/10/silicon-valley-bank-financia...
- hugs 4y agoThis didn't age well. So... Definite plans now to move 100% of my money out. Thankfully, I'm within FDIC limits.
- lolinder 4y ago> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarified that the bonds are the big problem on the assets side, not the loans. They had a bunch of low interest rate bonds that now have to be sold at a loss because interest rates are much higher.
- tommoor 4y agoVC's are generally the ones that actively promoted SVB to their investments. There's literally a branch on Sandhill road.
- lolinder 4y agoBy investors I'm not talking about venture capitalists, I'm talking about the stock market. I'm just surprised that people are just now realizing how bad it is to have the lion's share of Silicon Valley's financial resources centralized in one institution that doesn't have much in the way of other business.
- dahdum 4y agoTheir success is due to their tight focus though isn’t it? They’ve been around for 40 years and deeply entrenched in the VC ecosystem. I am very curious whether their poor risk management is new, or if they’ve been playing fast and loose for much longer and only blowing up now.
- blitzar 4y agoSince 1980 interest rates have only really ever gone down. Buying long dated bonds at X% and having to sell them a year later at X-1% actually makes you a capital gain. Old habits die hard.
- 4y ago
- bratao 4y agoEvery single founder I know in Brazil who has an SVB account has either withdrawn their funds or is attempting to open another account with a different bank to do so completely.
- deleted 4y ago[deleted]
- eqmvii 4y agoCNBC (live TV) is reporting efforts to raise capital have failed and deposits are fleeing faster than talks about a sale are proceeding. Lots of reports that its online banking systems are "down" or suspended. IMO there's a very good chance the bank enters FDIC receivership by Monday, and there may not be room to maneuver much anymore. Edit 10:05 am eastern: David Faber live on CNBC says he's hearing deposits are flowing out too quickly for a sale to be negotiated. Quote: "That may "set up something else" over the weekend"
- bhouston 4y agoI think that the bank gets rescued, probably very soon, the next few days. To let it fail will harm a significant portion of the US startup community and damage the country's ability to continue to innovate. In many ways, it is too big to fail because of its ties to the startup community. I think there is no other solution right now be a federal rescue of SVB. It is likely insolvent right now if they had to sell their assets at firesafes prices. An orderly unwind would help all involved and preserve a lot of value.
- dahdum 4y agoA federal rescue is fine by me, as long as the government turns a profit (like TARP), and the investors/management get clobbered before anyone else. Otherwise we are just encouraging more bad behavior.
- NickC25 4y agoI own put options that I bought yesterday at market open. It's not affecting my startup, but it's affecting my portfolio and I'm not happy that I can't sell those options.
- idopmstuff 4y agoWhy can't you sell them? Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.
- readyoursicp 4y agoI read them as puts on SVB, but he can't sell them because they halted trading on SVB.
- NickC25 4y agoThis ^. I bought puts yesterday at open, wanted to sell them today.
- NickC25 4y agoNo, I own put options on SIVB itself. Trading was halted in premarket and has yet to reopen. Honestly, it's disgusting. The amount of profit I would have made would be more than life-changing at a time when I could really use the money.
- jackric 4y ago"It's a big club, and you ain't in it!" - George Carlin
- eropple 4y agoTBH, if you're knowledgeable enough to be playing with puts, you should know that banks don't act like other equities in cases of extremity. It may be a bummer in the individual case, but it keeps the money machine working for society as a whole.
- KerryJones 4y agoInvestor here (trying to buy into SVB), but I don't currently own anything, nor do I have any current accounts with SVB. Everything I can see about them is completely overblown. Short and sweet version of research so far: - They had sold their bond portfolio for 1.8B loss (originally 21B, this is 8.5% loss) - They decided to raise money to match that loss (news release on 3/8/23) - Headlines are confusing people with "can't sell" referring to the 3/8 attempt at capital raise, but now people think SVB is trying to sell - Their Total Equity is around 13B (last balance sheet) -- that means if they completely dissolved and paid off all debts they would still have 13B on the balance sheet. Market Cap EOD 3/9 was 6.5B -- half of their actual asset value - If they go into cash insolvency and get bought out, they will likely have to sell those illiquid assets at a discount (let's estimate a 40% discount) - it's still worth 6.8B. Y'all SVB has been through this before, both in .COM and and '08. Also, to be clear -- I do not own any stock (but I want to)
- deleted 4y ago[deleted]
- KerryJones 4y agoWell, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html
- user_named 4y agoYes but you were very confident in everything you said that was wrong, so I guess that's all that matters
- KerryJones 4y agoI think I only said one wrong thing -- that they would last through this. The rest is factual (still is), I'm not positive that having bought a chunk wouldn't have a positive result (see other comment)
- cityofdelusion 4y ago
- Lightbody 4y agoDisclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess. We were reluctant to move our funds most of the day yesterday. Felt like a lot of dumb panic. We had emails from a few investors, most saying "stay calm" but one saying "move your money to this bank that I'm invested in!" ugh. We decided near the end of the day to move at least half our funds (in a money market) out, but by then it was too late to initiate anything. Now we're finding this morning nobody at SVB is returning our calls. We are able to log into the online portal just fine. So not sure if/when we'll be able to to move anything. Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line. Note: I'm still not actually worried that our money will evaporate permanently. But I can definitely see a situation where it is inaccessible for several weeks, causing issues with payroll and operations. I expect worst case a large bank will swoop in last second and buy all the dumb investment vehicles/bonds for pennies on the dollar and then our access to cash will come back.
- gizmo 4y agoWhen assets << liabilities nobody wants to buy the bank. Especially when you don't get any time to do due diligence. This isn't just a liquidity problem, this is a solvency problem. The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Your cash isn't at the bank anymore. Your cash has been invested in bonds and those bonds are now worth less than the number you see in your bank account. That's bad.
- asimpletune 4y agoIt's not a solvency problem. The bonds are valued based on when they mature, not what they fetch on the open market. It is a liquidity issue, which means the money is there, but they can not access the money in the amount of time they need it by.
- Edmond 4y ago
- jtarud 4y agoI think this thread will have tons of views from people in the startup world that are likely to be SVB customers. If we all agree to not do run in the bank, it will improve chances for SVB to make it through the next few days. I'll start with committing not to withdraw money my company [redacted] holds in the bank. We stand by SVB. I invite others to do the same.
- huhneverthot 4y agoOh man I actually laughed out loud at this. I don't think your HN comment is going to do anything in the face of the classic prisoner's dilemma.
- brian_cloutier 4y agoPrisoner's dilemma is a situation where you're only playing the game once, and you have no way to interact with the other participant. To the extent that this is a single bank run and the other actors are mostly anonymous and there is no way to verify whether or not someone has withdrawn their money then yeah this is a classic prisoner's dilemma and your only hope is to quickly get in line. However, trying to change the game is also a viable strategy! Public non-anonymized commitments like this are exactly how you tie this into our broader iterated game and escape the nasty equilibrium of prisoner's dilemma.
- mrelectric 4y agoI wouldn't share my company name in this context.
- disgruntledphd2 4y agoOh wow, I only saw the [redacted] version. Probably for the best.
- PakistaniDenzel 4y agoit's trivial to figure out the company from his username + bio though..
- adamsmith143 4y ago[flagged]
- JumpinJack_Cash 4y agoCan we stop for a second and comment on how tailoring a bank to startups is a bad idea? You don’t get any exposure to any of their potential hyper-growth in the form of debt/equity. All you get is the deposits but they also don’t grow, the total just becomes concentrated in the accounts of the few survivors while all the other accounts go to zero as most startups die.
- ak_111 4y agoIt is a great idea in a 0% interest world, SVB's stock price went from $24 in 2010 to $710 in 2020.
- JumpinJack_Cash 4y agoBanks are tech companies now? Add them to the list lol
- deleted 4y ago[deleted]
- blitzar 4y agoIt is an excellent customer base for a bank. Startups are going to burn at a fairly moderate rate, such that you have a fairly good idea of the cash flows you would face in the normal course of business - it wouldn't take the most advanced Ai in the world to know for every startup on your books what their cash flow out will look like for the next 12-24 months. By also being tied into the valley and the big VCs you have a fairly consistent stream of new accounts and large deposits throughout the year.
- JumpinJack_Cash 4y agoI am not sold on deposits rising overall because startups die a lot and the few homeruns will quickly dump you for Morgan Stanley or JPM as soon as they make it big. But even if deposits rise how are you going to propel the money multiplier considering that your customer base doesn’t need loans? Startups are notoriously scared of any debt/loan
- browningstreet 4y agoI'm SVB adjacent and all my employee stock purchase investments are under water, and they weren't a few weeks ago.
- BasilPH 4y agoWe only have an SVB account because of Stripe Atlas. Back then (2020) SVB was the only option, they hadn't added Mercury yet. I wonder if you still get SVB as an option today, or if Mercury is the default. I got annoyed with SVB because the online banking feels from the 90s and they charged fees that I found excessive. Switched to Brex a while ago, and never looked back. I was planning on closing our SVB account for a while, but didn't get around to yet. Now it seems like it might close itself. I wonder what the process will look like to get the $300 back we had on there.
- sgammon 4y agoI just went through Atlas in 2023. SVB was still an option, but we went with Mercury, thankfully.
- diebeforei485 4y agoWhy hasn't SVB offered to split people's accounts into multiple accounts capped at $250K each? This would be a win for everyone, correct? The cash is guaranteed, companies don't need to waste their time migrating a new bank, and SVB doesn't have to worry about their fractional reserve.
- synu 4y agoInsurance is per depositor, not per account number.
- mbreese 4y agoIIRC, that's not how the FDIC capping works. It's a unique((account_owner, account_type)) operation, not just by total number of accounts. The "account_owner" can get a little creative, but by and large, just splitting accounts won't work.
- claytongulick 4y agoFDIC convers a single person per account type up to 250k, not per account. If it were easy to get around the rule, why have a limit at all? Folks who de-risk by staying within the FDIC limit do it by splitting their money between multiple financial institutions.
- graderjs 4y agoThat would be a "hack" akin to inventing money or creating endless liabilities for FDIC. That's obviously--to me--not how this is going to work! :) xx ;p
- idlewords 4y agoI'm more strongly affected than I thought I would be, as all the giggling and schadenfreude is distracting me from my work.
- calmlynarczyk 4y agoWe're under the FDIC threshold in our account at the moment, so we are just riding it out expecting to get fully recouped in case of bank insolvency. We're looking into additional lines of credit for the short-term in case we're locked out of our funds for an excessive length of time. It sounds like it's too late to withdraw anyways, so all their customers can do at this point is exercise an emergency plan and line up options for short-term liquidity.
- barbarbar 4y agoWonder if anybody had seen it coming? And is about to do the next big short.
- ghoomketu 4y agoI have about $1800 in it as I was forced to open an account with them for Stripe atlas. It was a bit more but I think they deduct $25 / mo for the past 3 years. Not really using it since Stripe started in India recently. From what I understand since my amount is low I don't have to really do anything. Is that correct? Any advice for me?
- throwawayst23 4y ago[flagged]
- sdfghswe 4y agoFrom the reference to the mistress I guess this is probably a joke. But it's in really bad taste, and callous to those who might be in actual distress.
- graderjs 4y agoWell...it's text, can you really tell if it's a joke when it's not someone you know? Seems the callous might just be instead to start hanging on this poor soul for doing something bad when maybe they're just expressing how they are right now. Extreme situations can make people extremely disinhibited and honest. Better to err on the side of caution and not give this poor soul more burden next time! :) ;p
- bbor 4y agoYou're a smart person and I promise life is not what it looks like in this moment. Please feel to reach out to me or 988 if this is serious
- riseagainst22 4y agoI work at a bank most people are trying to park their funds at. It is a fucking PANIC mode disaster for them. Large companies in the Valley are trying to dump 100's of millions into our accounts
- graderjs 4y agoCan you explain, with a focus on how banks and money movements work, why this is a disaster? I'd assume this would be Christmas--Best day of the year, for a bank accepting migrating customers!
- riseagainst22 4y agoWe have to do due diligence checks even if its an established company dumping 100 mill on us. Suddenly 100's of startups are coming and overwhelming our compliance team.
- b20000 4y agothey never returned my calls as a self funded startup so fuck them they are trying to raise money? that’s cute, maybe they can create a pitch deck and be ridiculed a million times just like all of us “you need a team” “come back when you have revenue” “we need to see more revenue” “that market is too small” etc but you know what? they got buddies and you don’t as a founder
- graderjs 4y agoWell, "fuck them" is not "fuck the bank"-- the bank is just a ghostly outline of all the other people's money they contain. So really, you're saying "fuck you other people!" -- maybe that's not your intent! If so, think carefully before you reply next time! :) ;p xx ;p
- trialect 4y agoI'm sorry... when did hackernews became SVB news? 90% of my feed since yesterday contains the word SVB from hackernews. Is this some kind of US thing? Can we just move on to other things?
- MacsHeadroom 4y agoHackerNews is a service by and for the venture capital company Ycombinator. 30% of Ycombinator backed startups use SVB bank, most of them to run their payroll. So no we can't move on. The livelihoods of the people who this site was made by and for are at stake. They aren't even getting their paychecks this week. The entire venture capital and tech startup industries are immensely affected.