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What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can".

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731?s=20 https://twitter.com/88888sAccount/status/1634028258500169731...

banku_brougham 4y ago
Its so funny until you realize your seed-round investment in a friends company used SVB. Gonna be quite a show, this.
- idlewords 4y ago
  That makes it even funnier, though. At least to the rest of us.
  - loeg 4y ago
    Not now, Maciej.
    - idlewords 4y ago
      Literally no better time than now.
      - loeg 4y ago
        If it's all downhill from here, then I guess it will never be funny. You don't speak for "the rest of us."
        uoaei 4y ago
        Sounds like someone needs a little "kill your heroes"-ing.
    - pwinnski 4y ago
      Counterpoint: Now and always, as many times as it takes.
    - nvr219 4y ago
      lol
  - baggy_trough 4y ago
    You really have to be a tremendous shit to say this out loud, even if it's how you feel.
    - eggsmediumrare 4y ago
      Rich techies losing money and having to sell one of their houses is pretty funny. Regular people missing mortgage payments is not funny.
- sophacles 4y ago
  Isn't the investor justification for taking a huge chunk of profits "we take risk"? I fail to see how this is unfunny just because the risk you took played out in the bad way.
  - dannyw 4y ago
    More people will lose jobs.
  - serial_dev 4y ago
    I believe they didn't think that the biggest risk to their investment would be the bank the co-founders chose.
    - recursive 4y ago
      Perhaps it wasn't the biggest risk at the time. Still a risk though.
- FormerBandmate 4y ago
  Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only time will tell how much they’ll be able to recoup. It’s not an FTX situation, the assets are somewhat there, but the losses in securities look extreme and unwinding them at a fair price may take months, if not years
  - shawabawa3 4y ago
    It is actually exactly an FTX situation Not as extreme maybe, and less fraud got us here, but $assets < $deposits
    - cowmoo728 4y ago
      There is a very large difference between FTX and SVB. The people behind FTX will probably go to jail because they committed crimes and effectively stole money. SVB mismanaged interest rate risk and ended up on the wrong side of interest rate hikes. They had similar results of people quickly trying to pull all their money out, but it's not "exactly an FTX situation".
      - blibble 4y ago
        no bank on earth can survive every depositor turning up at once and demanding their money whereas an exchange shouldn't have a position at all and a hedge fund normally doesn't allow withdrawals at all (without vast notice)
        freejazz 4y ago
        Well, people didn't show up to demand their money for no reason.
    - hef19898 4y ago
      My reading is that the long term book value of those assets is bigger than the deposits. And now that the deposits are withdrawn, SVB ahs to liquidate thise assets at current market value, which is (maybe?) lower than deposits. So, at the least, it looks like a strange risk management approach on behalf of SVB. And those clients that kept most of their money at this one, single bank.
- berkle4455 4y ago
  They’ll most likely be made whole or close to whole. It’ll just take time, so as long as that startup doesn’t have a huge burn already, should be fine. Anyway you bought % in their company which you still own, the cash was gone when you wired it.
  - sroussey 4y ago
    Large burn? You mean any burn at all… Money there to to be spent over the next six months is now not available. Payroll in Silicon Valley is going to be a mess this week. Companies that lend to startups short term are going to have a busy time.
    - berkle4455 4y ago
      [deleted]
      - lmeyerov 4y ago
        Yep traditional advice is don't burn > 100k / mo when early stage, and most lower. So 2mo+ payroll fine for a normal seed, early A. Later stage are normally more sensitive. It's also a real issue with profitable companies whose outflows are at that level and are considering bigger purchases -- I'd be bailing if we were there just bc that. Except the last couple years have been bonkers with little revenue / spending alignment during fundraising. Early stage burns are above that level, which makes the situation worse for current crop of co's. Ouch and good luck :(
    - berkle4455 4y ago
      For sure. The post I was replying to was for a seed stage company though. They’ve got $250k secured by Monday. My point was small firms can meet payroll and bills just fine with only $250k
      - sroussey 4y ago
        Sure, pre-seed. Seed is usually $2m-5m these days, and received all at once (mostly) as compared to VCs which do capital calls.
tiffanyh 4y ago
Imagine having a life changing amount of personal wealth deposited at a Crypto exchange, and before you can spend it - the exchange sets it on fire.
- idlewords 4y ago
  It's still life-changing after!
- themitigating 4y ago
  That sounds terrible and I feel bad for them.
stephenhuey 4y ago
Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
- victor106 4y ago
  Yeah, the cool kids also say/used to say only if they used blockchain this wouldn’t have happened…lol
- capableweb 4y ago
  Thing is, it's probably true for 1% of the cases, that things are slow for no good reason. Trick is how to identify that 1% of times when you can truly make something better. But 99% of the times, it's all shit and ends up like this, or similarly.
  - deleted 4y ago
    [deleted]
  - ethbr0 4y ago
    The irony is that, as near as I can tell, they cratered their balance sheet because they were heavily into long maturity bonds (i.e. super conservative). https://www.cnbc.com/2023/03/09/svb-financial-falls-more-than-50percent-as-tech-bank-looks-to-raise-more-cash.html https://www.cnbc.com/2023/03/09/svb-financial-falls-more-tha... That seems an odd position to allow to build given the current macro. Post-Fed changing their mind on inflation, the course was charted. I'm guessing they held to avoid taking losses, and at some point it became untenable?
    - travisjungroth 4y ago
      The problem isn’t what they bought it’s what they sold. It was all correlated. Loans to startups were going bad while startups were pulling deposits since they weren’t getting funded. So you’re taking losses while losing capital. Doesn’t really matter what else you’re holding at that point if it doesn’t happen to be skyrocketing right now. Long term bonds will never be that thing, but at any point in time almost nothing else would be, either.
Octokiddie 4y ago
Maybe it's time to resurrect Fucked Company. https://en.wikipedia.org/wiki/Fucked_Company https://en.wikipedia.org/wiki/Fucked_Company
dheera 4y ago
Maybe it's time to get rid of fractional reserve banking and change it to full reserve banking. We really don't need a bunch of fake money flying around. It's time to have every dollar in the wild be a real dollar.
- kibwen 4y ago
  Full-reserve banking doesn't eliminate risk, it pushes it elsewhere. The nice thing about fractional reserve (yes, there are nice things about it!) is that it allows people to have a savings without completely paralyzing the money supply. Money that is "saved" can still be used for productive purposes. Yes, this introduces risk (of the sort that the FDIC is intended to ameliorate), but the alternative is to either discourage savings entirely in favor of active investments (which are themselves mostly subject to the same sort of risks as savings accounts of today), or otherwise encourage savings but let the economy be strangled by a lack of funds (which becomes a vicious cycle). Certainly we can argue about the precise percentage of the fractional reserve, but keep in mind that "100%" is not a panacea.
  - dheera 4y ago
    > Money that is "saved" can still be used for productive purposes. If I wanted to put money to productive purposes (at risk, with reward) I would do so myself. I'd buy bonds, stocks, options, lend money out, whatever. I already do this. Whatever I keep in cash, without investing, is intentionally kept as cash, and I want that part to be zero risk, I don't need the bank to help me invest it at nonzero risk.
    - jen20 4y ago
      A savings account is not cash… CASH is cash. Keep it in a vault. The cost of holding it is not nothing.
themitigating 4y ago
Why does it seem the perception of the tech industry is that products are just useless devices (like what you mentioned) or scams, that its employees are lazy and entitled, and basically it's all just a giant bubble of alof elites. The same traits are present with every industry. How many BS oil fields are funded but turn out to be over hyper. What about real estate scams? Right wing media has done a great job of changing the conversation from big oil to big tech and many people here are helping, maybe with geniue intention, but foxnews or whatever is attacking tech because it's mostly liberals not because they are concerned with the industry's practices

banku_brougham 4y ago

Its so funny until you realize your seed-round investment in a friends company used SVB. Gonna be quite a show, this.

idlewords 4y ago
That makes it even funnier, though. At least to the rest of us.
- loeg 4y ago
  Not now, Maciej.
  - idlewords 4y ago
    Literally no better time than now.
    - loeg 4y ago
      If it's all downhill from here, then I guess it will never be funny. You don't speak for "the rest of us."
      - uoaei 4y ago
        Sounds like someone needs a little "kill your heroes"-ing.
  - pwinnski 4y ago
    Counterpoint: Now and always, as many times as it takes.
  - nvr219 4y ago
    lol
- baggy_trough 4y ago
  You really have to be a tremendous shit to say this out loud, even if it's how you feel.
  - eggsmediumrare 4y ago
    Rich techies losing money and having to sell one of their houses is pretty funny. Regular people missing mortgage payments is not funny.
sophacles 4y ago
Isn't the investor justification for taking a huge chunk of profits "we take risk"? I fail to see how this is unfunny just because the risk you took played out in the bad way.
- dannyw 4y ago
  More people will lose jobs.
- serial_dev 4y ago
  I believe they didn't think that the biggest risk to their investment would be the bank the co-founders chose.
  - recursive 4y ago
    Perhaps it wasn't the biggest risk at the time. Still a risk though.
FormerBandmate 4y ago
Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only time will tell how much they’ll be able to recoup. It’s not an FTX situation, the assets are somewhat there, but the losses in securities look extreme and unwinding them at a fair price may take months, if not years
- shawabawa3 4y ago
  It is actually exactly an FTX situation Not as extreme maybe, and less fraud got us here, but $assets < $deposits
  - cowmoo728 4y ago
    There is a very large difference between FTX and SVB. The people behind FTX will probably go to jail because they committed crimes and effectively stole money. SVB mismanaged interest rate risk and ended up on the wrong side of interest rate hikes. They had similar results of people quickly trying to pull all their money out, but it's not "exactly an FTX situation".
    - blibble 4y ago
      no bank on earth can survive every depositor turning up at once and demanding their money whereas an exchange shouldn't have a position at all and a hedge fund normally doesn't allow withdrawals at all (without vast notice)
      - freejazz 4y ago
        Well, people didn't show up to demand their money for no reason.
  - hef19898 4y ago
    My reading is that the long term book value of those assets is bigger than the deposits. And now that the deposits are withdrawn, SVB ahs to liquidate thise assets at current market value, which is (maybe?) lower than deposits. So, at the least, it looks like a strange risk management approach on behalf of SVB. And those clients that kept most of their money at this one, single bank.
berkle4455 4y ago
They’ll most likely be made whole or close to whole. It’ll just take time, so as long as that startup doesn’t have a huge burn already, should be fine. Anyway you bought % in their company which you still own, the cash was gone when you wired it.
- sroussey 4y ago
  Large burn? You mean any burn at all… Money there to to be spent over the next six months is now not available. Payroll in Silicon Valley is going to be a mess this week. Companies that lend to startups short term are going to have a busy time.
  - berkle4455 4y ago
    [deleted]
    - lmeyerov 4y ago
      Yep traditional advice is don't burn > 100k / mo when early stage, and most lower. So 2mo+ payroll fine for a normal seed, early A. Later stage are normally more sensitive. It's also a real issue with profitable companies whose outflows are at that level and are considering bigger purchases -- I'd be bailing if we were there just bc that. Except the last couple years have been bonkers with little revenue / spending alignment during fundraising. Early stage burns are above that level, which makes the situation worse for current crop of co's. Ouch and good luck :(
  - berkle4455 4y ago
    For sure. The post I was replying to was for a seed stage company though. They’ve got $250k secured by Monday. My point was small firms can meet payroll and bills just fine with only $250k
    - sroussey 4y ago
      Sure, pre-seed. Seed is usually $2m-5m these days, and received all at once (mostly) as compared to VCs which do capital calls.

tiffanyh 4y ago

Imagine having a life changing amount of personal wealth deposited at a Crypto exchange, and before you can spend it - the exchange sets it on fire.

idlewords 4y ago
It's still life-changing after!
themitigating 4y ago
That sounds terrible and I feel bad for them.

stephenhuey 4y ago

Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)

victor106 4y ago
Yeah, the cool kids also say/used to say only if they used blockchain this wouldn’t have happened…lol
capableweb 4y ago
Thing is, it's probably true for 1% of the cases, that things are slow for no good reason. Trick is how to identify that 1% of times when you can truly make something better. But 99% of the times, it's all shit and ends up like this, or similarly.
- deleted 4y ago
  [deleted]
- ethbr0 4y ago
  The irony is that, as near as I can tell, they cratered their balance sheet because they were heavily into long maturity bonds (i.e. super conservative). https://www.cnbc.com/2023/03/09/svb-financial-falls-more-than-50percent-as-tech-bank-looks-to-raise-more-cash.html https://www.cnbc.com/2023/03/09/svb-financial-falls-more-tha... That seems an odd position to allow to build given the current macro. Post-Fed changing their mind on inflation, the course was charted. I'm guessing they held to avoid taking losses, and at some point it became untenable?
  - travisjungroth 4y ago
    The problem isn’t what they bought it’s what they sold. It was all correlated. Loans to startups were going bad while startups were pulling deposits since they weren’t getting funded. So you’re taking losses while losing capital. Doesn’t really matter what else you’re holding at that point if it doesn’t happen to be skyrocketing right now. Long term bonds will never be that thing, but at any point in time almost nothing else would be, either.

Octokiddie 4y ago

Maybe it's time to resurrect Fucked Company. https://en.wikipedia.org/wiki/Fucked_Company https://en.wikipedia.org/wiki/Fucked_Company

dheera 4y ago

Maybe it's time to get rid of fractional reserve banking and change it to full reserve banking. We really don't need a bunch of fake money flying around. It's time to have every dollar in the wild be a real dollar.

kibwen 4y ago
Full-reserve banking doesn't eliminate risk, it pushes it elsewhere. The nice thing about fractional reserve (yes, there are nice things about it!) is that it allows people to have a savings without completely paralyzing the money supply. Money that is "saved" can still be used for productive purposes. Yes, this introduces risk (of the sort that the FDIC is intended to ameliorate), but the alternative is to either discourage savings entirely in favor of active investments (which are themselves mostly subject to the same sort of risks as savings accounts of today), or otherwise encourage savings but let the economy be strangled by a lack of funds (which becomes a vicious cycle). Certainly we can argue about the precise percentage of the fractional reserve, but keep in mind that "100%" is not a panacea.
- dheera 4y ago
  > Money that is "saved" can still be used for productive purposes. If I wanted to put money to productive purposes (at risk, with reward) I would do so myself. I'd buy bonds, stocks, options, lend money out, whatever. I already do this. Whatever I keep in cash, without investing, is intentionally kept as cash, and I want that part to be zero risk, I don't need the bank to help me invest it at nonzero risk.
  - jen20 4y ago
    A savings account is not cash… CASH is cash. Keep it in a vault. The cost of holding it is not nothing.

themitigating 4y ago

Why does it seem the perception of the tech industry is that products are just useless devices (like what you mentioned) or scams, that its employees are lazy and entitled, and basically it's all just a giant bubble of alof elites. The same traits are present with every industry. How many BS oil fields are funded but turn out to be over hyper. What about real estate scams? Right wing media has done a great job of changing the conversation from big oil to big tech and many people here are helping, maybe with geniue intention, but foxnews or whatever is attacking tech because it's mostly liberals not because they are concerned with the industry's practices