28 ms·

30% of YC companies exposed through SVB can’t make payroll in the next 30 days

• justinzollars 4y ago
  This is actually an interesting time. A make or break moment for Jerome Powell. Will he reverse? Can he tolerate the pain? Monday approaches.
• more_corn 4y ago
  It will be open Monday morning. Deposits are safe.
  • Asparagirl 4y ago
    No. INSURED deposits are safe, up to $250k per signer on an account, depending on how that account is titled and how many other accounts that company or signer might have at the same bank, and some other details that are very nitpicky but also very important. That is a very different statement.
• ezekg 4y ago
  Per the CEO of your favorite orange site, if somebody here doesn't know who this is (I didn't). Things don't look good right now.
• rvz 4y ago
  I guess SVB was too busy building the VC pyramid scheme to care about asset and money management. I wonder what the sentiment of YC startups that have access to bookface [0] is right now. I don't think it is happy days there. [0] https://bookface.ycombinator.com/ https://bookface.ycombinator.com/
• jppope 4y ago
  Doesn't Y/C have money for these sorts of things? ... seems like a bad situation for them as well since it will wipe out a lot of their holdings
  • adamnemecek 4y ago
    This sounds like a huge amount of money and I can't imagine YC has that much cash lying around.
    • djbusby 4y ago
      Capital call to their investor base?
      • adamnemecek 4y ago
        It's probably a lot more money than one can put together on such short notice.
        • jppope 4y ago
          sure, but they made it seem like they really just need a round of payroll for their companies and stuff can get sorted out after, or did I miss something?
          • radlad 4y ago
            The most immediate problem is payroll, perhaps as immediate as Monday. But there's still no concrete end in sight for if and when non-FDIC insured amounts will be available.
            • deleted 4y ago
              [deleted]
        • consumer451 4y ago
          This seems like a great opportunity for investors to signal to founders what type of partners they are in times of need. Zach Coelius nailed it: > I am telling all my companies that even in the worst case scenario and there is no buyer (highly unlikely), they will still get the vast majority of their money back and this just becomes a short term issue. > I, for one, certainly plan to fund my companies through this. https://twitter.com/zachcoelius/status/1634272357132165121 https://twitter.com/zachcoelius/status/1634272357132165121
• anononaut 4y ago
  What is your congressman going to do?! Nothing meaningful unless society starts calling for the end of fractional reserve lending.
  • vkou 4y ago
    > What is your congressman going to do?! Nothing meaningful unless society starts calling for the end of fractional reserve lending. ... What? If you think this is an economic catastrophe, just wait until you see what happens if we get rid of fractional reserve banking. It'd be a nuclear bomb in a china shop. The 'cure' is way worse than the disease.
    • anononaut 4y ago
      Only because we allowed it to get this bad. End the Fed.
      • mr_00ff00 4y ago
        [flagged]
      • david927 4y ago
        If only we had thousands of years of history showing that this happens every time. Every. Single. Time.
    • maxilevi 4y ago
      Can you provide any arguments as to why? I don’t see how it can make things worse in the long run
      • vkou 4y ago
        You tell me - what do you think would happen to the economy if lending ground to a stand-still (Which is exactly what would happen, with a double whammy of the money supply massively contracting[1] as loans are paid off, but not rolled over)? Like, sure, I'm willing to entertain the idea that its possible to come up with some kind of planned steady-state economy that does not require speculative allocation of capital to drive production. But you're going to have to present a much more compelling vision of that future than 'Just get rid of lending.' (Also, housing prices would collapse overnight[2], boomers and other retirees will lynch anyone responsible for something like that.) For another argument, note that the health of the economy is a function of how quickly money moves through it. Fractional reserve banking is the engine that moves that money. Stop the movement of money, and you'll stop the economy. All in all, I think we're better off with having the occasional bank go bust, and its customer funds getting frozen for a few weeks while the FDIC unfucks the bank's balance sheets, pays dollar-for-dollar cash for its illiquid, currently underwater long-term bonds, holds them until maturity for a profit, and then destroys the money they made in that profit. It's an infrequent failure case, it doesn't result in money getting lost, and the bank gets punished enough that most of its compatriots think twice before YOLOing the farm on long-term treasuries. [1] This is called deflation, and if you think inflation is bad, imagine living in a world where nobody spends or invests money on anything, because you can become richer by doing nothing, and just sitting like a dragon on a hoard of gold. [2] Heaven knows, I rail against housing price inflation all the time, but you are going to have a bad political time if you just pull the rug out from under homeowners.
• halfmatthalfcat 4y ago
  All respect to Gary, I feel like "extinction level event" is quite hyperbolic. Obviously he cares about seeing YC companies survive but this is not going to wipe out the US startup scene.
  • j_crick 4y ago
    After reading that and playing some Kojima games lately, all I could think of was a Funds Stranding game.
  • version_five 4y ago
    As bad as it sounds, even if it was an ELE*, I think killing off what has become a monoculture will not necessarily be all that bad for innovation or the ecosystem (it will be bad for the people at the companies that die obviously). Tan makes it sound like it will favor the balance of power to big tech. I think big tech is irrelevant here, and it may actually shift the balance of power away from SV stereotype startups and give some oxygen to other businesses. * honestly I think most solvent startups will find workarounds, it's more going to be a big stress than actual destruction
  • justinzollars 4y ago
    It is an "extinction level event" for those whose bank accounts went to zero. We are talking about a large number of jobs and people effected. Its pretty sad really.
    • ahzhou 4y ago
      It'll be a haircut (my uninformed bet is ~10% loss), but definitely not zero.
      • justinzollars 4y ago
        How do you pay staff with no money?
        • decodebytes 4y ago
• kneebonian 4y ago
  > If you or your company are affected, I recommend that you reach out to your local congressman to get this on their radar TODAY. No this is complete and utter bull hockey, this is 2008 all over again in every concievable way except this time instead of mortagages and housing it is tech that is begging for a bailout. This is nonsense, for years all the SV tech bros were bragging about "changing the world through arbitaging pizza delivery misinformation ML." getting paid ridiculous salaries, and playing foosball. I don't have sympathy for them, at all. Most of the "startup" companies had the end goal of simply being bought out they never wanted to actually do anything they were just a get quick rich scheme. Quite frankly this correction was long overdue and obvious to everyone who thought about it for even a moment. Now that the limitless capital has stopped (because of the fed rate hikes and because of the boomer retirement) it turns out it isn't profitable to have a buinsess model where you are loosing money on every transaction. The curtain is pulled down, the emperor has no clothes, the chickens are coming home to roost. Deal with it. EDIT: As a followup I don't give a damn about the jobs lost, bailouts are the worst possible thing a government can do, all it does is screw the little people over while the owners keep the wealth and use it as an excuse to cut pay and lay people off.
  • vecter 4y ago
    My understanding may be incorrect (if so, someone please correct me), but I thought this was caused by SVB buying long-term bonds which fell in value after interest rates went up. I don't think this has anything having to do with unprofitable zombie startups being kept alive by "free" money (which roughly ended at the end of 2021). It seems you're angry at tech folks, but they didn't do anything wrong. They're just the victims of SVB's bad bet. I'm not saying a bailout is justified either (I have no opinion on that), just pointing out who's responsible here.
    • jmclnx 4y ago
      >I thought this was caused by SVB buying long-term bonds which fell in value after interest rates went up I heard the same thing, but they took a gamble and lost. That is free enterprise. People who when to SVB will loose too, again free enterprise. It was no secret interest rates were going to go up, so 2 years ago they should have sold those bonds and took a small loss.
• apnew 4y ago
  Bold of him to assume 30% of YC startups not surviving means "mass extinction" of american startups!
  • deleted 4y ago
    [deleted]
  • manquer 4y ago
    It is not just 30% of YC alone. YC startups tend to be on average more successful than others, so number probably much higher for other startups. Not making payroll is just the first problem. Vendors are the next , many startups provide critical services from healthcare to security to dozen other sectors if they cannot pay for their servers those services will go down too a lot of products such as saas apps , cloud services are sold to startups extensively. If collectively startups stop making payments, those businesses become unsound even big tech like AWS will feel pain and mean layoffs everywhere. Not making payroll for tech and tech adjacent people also means lot of local business will be distressed in those communities think your grocers and barbers etc.
    • kazen44 4y ago
      > many startups provide critical services from healthcare to security to dozen other sectors if they cannot pay for their servers those services will go down too I don't know how this works in the US, but there not some kind of clause or law which basically prevents critical companies from becoming bankrupt like this? In my country, vital infrastructure is supposed to have money on hand to keep the infra chugging along while the company gets put under administration. (or nationalized, depending on the political climate and what it provides).
      • iamdbtoo 4y ago
        We used to use regulations to limit this kind of damage, but those have been removed to allow for money to be made. So instead of proactively preventing these tragedies the government is there to help clean up the mess.
      • 4y ago
• kragen 4y ago
  sanitized link: https://nitter.fdn.fr/garrytan/status/1634286688922132481 https://nitter.fdn.fr/garrytan/status/1634286688922132481 i wonder where garry is getting this 30% number or if he just made it up
  • mattkrisiloff 4y ago
    YC sent out a survey this morning to all companies asking if effected
    • DWqRdped 4y ago
      Founders lie on those surveys. I bet its closer to 50% who can't make payroll for a month if they only have access to 250k
      • Turing_Machine 4y ago
        At the median Silicon Valley engineering wage, $250k would be enough to pay about 100 engineers for one week, or 25 engineers for a month. Yeah, $250K isn't going to go very far.
        • kragen 4y ago
          most california companies issue paychecks every two weeks
          • Turing_Machine 4y ago
            Okay, then. 50 engineers for two weeks. I'm not sure why that matters?
            • kragen 4y ago
              enormously more companies have 50 employees or more than have 100 employees or more
    • 4y ago
• newaccount2023 4y ago
  Call your member of Congress...to see about "socializing" this on to single working moms
  • dysonpunk 4y ago
    The one redeeming quality of corporate Democrats is that they have zero sense of personal loyalty. It’s why no one of the left or right respects them. It sucks when they turn on a good man who made mistakes like Al Franken. But it’s fun to watch them fail to circle the wagons when it’s Theranos or FTX or Y Combinator.
    • danhak 4y ago
      But it’s fun to watch them fail to circle the wagons when it’s Theranos or FTX or Y Combinator. Ummm...one of these things is not like the others
      • newaccount2023 4y ago
        [flagged]
  • version_five 4y ago
    Right. Everyone's a libertarian when the upside favors them and then suddenly a socialist when they actually experience downside.
    • quickthrowman 4y ago
      Privatized profits, socialized risk. The VCs have plenty of money to backstop a month of payroll for their portfolio companies, taxpayers should not be paying for this one. It sucks for customers that SVB chose greed over risk management, had they invested in short duration treasuries they would be fine. It’s time to let risk actually have consequences instead of big daddy Fed/Gov coming to the VCs rescue.
      • 4y ago
• TheAlchemist 4y ago
  Are you guys serious ? I saw this and David Sacks tweet with similar message. When times are good - they are the first to criticize government reach and taxes which are spend on other people. 100% capitalism etc. When times get bad - we need government to step in and save us ! Ridiculous. Besides, it seems the situation is nowhere near as bad as he paints it.
  • corbulo 4y ago
    Well, the situation was created by the government (fed raising rates). I don't see it as hypocritically as you do. SVB is kindling a bank run right now. https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-bank-branch-as-depositors-attempt-to-pull-cash-report/ https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-...
    • afavour 4y ago
      If it was caused by the government why wouldn't other banks be experiencing the same issues SVB are?
      • corbulo 4y ago
        I didnt say its the sole variable. Just the prime mover of the change. SVB obviously had an elevated risk profile.
    • boc 4y ago
      The FED isn’t quite the government. If the government controlled monetary policy directly things would be way, way worse.
      • bloodyplonker22 4y ago
        Indeed. The situation was caused by a combination of the reckless investing that SVB did, the FED failing to raise interest rates earlier, and irresponsible amounts of government spending.
    • 4y ago
• tekla 4y ago
  Good stuff, let it burn. The system is working as intended. People who made very very risky dumb bets are getting punished heavily for it.
  • Ancalagon 4y ago
    How is this good? This means companies will fail and employees won’t get paid through essentially no fault of their own?
    • esotericimpl 4y ago
      [dead]
    • ilyt 4y ago
      Teaching companies lesson about diversifying their finances is probably worth few startups going down (...which they might anyway). VS robbing taxpayers for another private corporation mistake
    • wellthisisgreat 4y ago
      Businesses with more than 250k in the account should have diversified. Employees are at no fault of course but so are tax payers. YC companies that have been exposed so badly through this are probably non-essential. My company is also exposed and we will suffer, because we were stupid but luckily not complete morons
    • kazen44 4y ago
      welcome to a capitalistic economy in which the free market reigns supreme. This is part of a healthy economic market according to market economic theory.
    • deleted 4y ago
      [deleted]
    • deleted 4y ago
      [deleted]
  • deleted 4y ago
• dysonpunk 4y ago
  [flagged]
• gauravphoenix 4y ago
  As of right now, yes. Give it a week, and it will get sorted out. In all likelihood, the bank will have a new owner by coming Monday/Tuesday and everyone will be able to make the transactions.
  • hn_throwaway_99 4y ago
    Agreed. Given that this seems like primarily a timing issue (i.e. SIVB being forced to liquidate bonds at a loss because their tech-heavy depositor base needed their cash), I'd think that a better capitalized and more broadly diversified bank (i.e. not just tech or crypto depositors) would be salivating at the chance to buy these assets up on the cheap.
    • bequanna 4y ago
      Buy what assets? From what I understand, SIVB had paper losses which totaled maybe ~30% of deposits before the bank run. If 70% of depositors withdrew before the bank went into receivership there is nothing left. And the assets they held were primarily treasury securities and MBS. Why would anyone sell those “on the cheap” when the market is super liquid?
      • alooPotato 4y ago
        Seems unlikely 70% of companies were able to get their assets out. I guess its 70% of deposits so.... maybe? If there were assets on the books left, the gov't could purchase them at face value and just hold to maturity.
        • t0mas88 4y ago
          The government buying those bonds at face value would be ridiculous. They're worth 80% of face value or less on the open market. So buying them at face value would be a 25% subsidy... Billions of tax money flowing to VC funded startups. That's an absolute no-go. The solution is to wipe out the SVB shareholders, that's the only way to make sure other banks don't have an incentive to do these things. Then pay the startups whatever part of the funds you can recover on the market (may be close to 90% if some comes from SVB shareholders). The VCs may have to step in at a few companies for loosing 10%, but that's likely the ones that weren't doing great anyway. Using tax payer money to save SVB shareholders and some VCs is ridiculous. These guys have enough money, they're all professionals, it's a risk they took and unfortunately they lost this round. Better luck next time.
• tiffanyh 4y ago
  Why exactly can't they make payroll? Because their funds are frozen? Or they assume their funds are completely gone?
  • hasseldahoff 4y ago
    [dead]
  • zamnos 4y ago
    SVB's failure means that anything over $250k that a startup had there is not currently accessible. They'll probably be made whole in a couple of months by FDIC, but payroll, along with rent and the cloud bill won't wait and can't be paid via IOUs.
    • nsnick 4y ago
      Why would the FDIC make them whole? Doesn’t FDIC insurance only cover $250,000?
      • zamnos 4y ago
        You're right that FDIC doesn't have to, but it's in everyone's interest that people keep keeping their money in a bank, so the long and the short of it is that the FDIC's playbook is to find another bank to buy SVB (for pennies on the dollar), and as part of that deal the purchaser bank will make them whole. FDIC doesn't necessarily have to do that, but it's what they've done in the past, so guessing that they will do something similar this time around isn't out of the question.
        • landemva 4y ago
          > it's in everyone's interest that people keep their money in a bank I never heard that before. The rich keep their money in investments.
          • zamnos 4y ago
• honkler 4y ago
  techbros.. did we get too cocky?
  • muzz 4y ago
    He's asking for a government bailout, so looks like the cockiness has only _increased_
  • popcalc 4y ago
    >February 25, 2022 >>>/g/
    • honkler 4y ago
      goodmorning /g/entleman
• 3wolf 4y ago
  30% of all YC companies, or 30% of YC companies banking with SVB? The phrasing implies the latter.
  • nedwin 4y ago
    It's the latter.
  • rubyron 4y ago
    Probably the same number. Almost every startup in SF uses SVB by default. edit: misread. My estimate of at least 30% of VC-funded startups in SV using SVB stands. It’s recommended as the default by most investors.
• spamizbad 4y ago
  Thinking back to the financial crisis when the idea of protecting home owners was floated and we had to endure finance guys ranting about greedy home owners and their 2nd bathrooms.
• kingstoned 4y ago
  Going to the nanny state to bail them out of the consequences of their bad choices
• nodesocket 4y ago
  Gary is currently on CNBC giving a pretty good interview. He's actively pitching for government intervention and bailout. I'm torn on this stance, why should taxpayers bail out banks who continue to make poor decisions, but as a small business owner and former SVB customer I completely sympathize with the plight of the founders. They did nothing wrong, they followed the rules, they thought they were being responsible using SVB, and here we are the small companies, founders, and potential employees pay the price. Ultimately I am sick and tired of my hard earned money going to the government for them to redistribute it, whether it be bailouts, stimulus payments, student loan forgiveness.
  • halfmatthalfcat 4y ago
    Why bail out what are essentially high risk ventures? Seems like the money would be much better spent with the aforementioned loan forgiveness to people who are actually hurting rather than 20-something YC founders who will easily land on their feet.
  • mikeyouse 4y ago
    They wouldn't be bailing out the bank here.. at least not in any normal sense of the word. People who owned the bank (equity holders) are going to be zeroed out, people who lent money to the bank (creditors) are going to be nuked too. The people being bailed out are individuals and companies who had deposits with them. If the government can make all of the depositors whole, take the associated amount of capital off their balance sheet and hold onto it until it matures, thus costing the taxpayers $0, that seems mostly okay to me? There's the opportunity cost of money blah blah but total increase to the deficit would be $0 and all of these companies would be able to continue operating. What's the point of a Federal gov / lender of last resort if they can't keep depositors in solvent banks whole?
    • tekla 4y ago
      There is a reason why the FDIC limit is $250k and not a infinity symbol. The Fed's job is not to bail out every single entity that knowingly held assets in a risky manner.
• mellosouls 4y ago
  I think the idea that tech is going to be set back a decade if a load of YC companies fail is an interesting assesment from the head of YC, and might be interpreted by some as hyperbolic and self-aggrandizing.
  • philkuz 4y ago
    YC isn’t the only set of companies that used Svb, they’re probably representative of the distribution of startups that need banking
    • ryanSrich 4y ago
      Roughly 50% of all venture backed startups in the US have an SVB account. So yes, it's much larger than just YC.
      • chrisandchris 4y ago
        How could someone think that this was a really good idea? It's like joining a pension fund with the average insured being over 50. Distribute risk whenever possible.
        • ryanSrich 4y ago
          Generally agree. I run a startup and we have a few bank accounts. Luckily we were able to pull what we had in SVB (around 35% of cash reserves) on Thursday. I think a lot of startups are in this situation. They have SVB accounts, but likely don’t have all of their money in there. One thing to remember, SVB is very founder friendly. Often giving companies favorable lines of credit, giving founders favorable mortgages, etc. They helped us tremendously with our PPP loan, and are also deeply integrated with products like Stripe Atlas.
  • kahrl 4y ago
    This is complete hyperbolic bullshit with the sole purpose of pushing a narrative, getting the right people concerned about their political image, and getting parachute out of this mess fast. Can't blame the guy for doing his job, but you can call bullshit on him.
• phphphphp 4y ago
  Garry has an incentive to say the sky is falling because the sooner this is resolved the less pain it’ll cause, but to say this is an industry extinction event is a stretch. Even if the extremely unlikely scenario plays out and companies are unable to make payroll, employees are very unlikely to walk out, it would make an inconvenient situation (no pay) much worse (terminated) in an already challenging economic climate. Anybody with the financial means to walk away because payroll has been missed is someone with the financial means to ride out a few weeks waiting to be paid. We will see many startups fall in the next few weeks + months, and many will attribute it to the failure of SVB, but SVB’s failure is a symptom of the broader economic environment, not a cause, and the same factors that caused SVB to fail are already hurting startups — like the difficult fundraising environment at the moment. SVB will be an easy scapegoat, “we didn’t fail, it was SVB’s fault!” Most any startup that attributes its failure to SVB’s collapse would have been dead in a few months anyway.
  • woodruffw 4y ago
    Excellently said. On top of that: there is no meaningful risk that these startups will not be made whole in the coming weeks. Given the absence of risk, there will be plenty of lenders competing to provide these companies with liquidity for a relatively small slice of the pie, should it even come to that.
    • sp332 4y ago
      To be clear, you think the FDIC will be able to sell enough bank assets to cover 100% of deposits?
      • woodruffw 4y ago
        No, I think they'll recover a large percentage of it, and that the difference won't matter.
        • Danieru 4y ago
          I don't think "being made whole" means what you think it means.
• alexpotato 4y ago
  Isn't this a similar version of what happened in the Savings and Loans crisis [0]? Effectively, banks lent money at X%. Then the government raised interest rates. Therefore, you owed your depositors a higher interest rate than you were collecting from your loans. I know, not exactly the same but both related to the govt raising rates and banks not necessarily anticipating the move. 0 - https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis
• esotericimpl 4y ago
  Can't believe VC has gone full communist. Socialize the losses it seems.
  • dsfhakjhsf 4y ago
    Fittingly, VC can either stand for "Venture Capitalist" or "Viet Cong". They want socialism for themselves and capitalism for the rest of us.
  • dragonwriter 4y ago
    “Government should serve the interests of the investor class” is…not communism. The system that does that is named after another name for the “investor class”.
• formvoltron 4y ago
  Are there dedicated companies that want to continue if they could move key employees to a low cost, high productivity location? I suggest Maine.
• skylabmelody 4y ago
  VCs have plenty of billions let's have them do the bail-out this time around.
• pkaye 4y ago
  The FDIC will be working over the weekend to audit things and by Monday have enough funds released so customers aren't totally stuck.
  • dragonwriter 4y ago
    The FDIC will be working over the weekend to sort out account ownership by ownership category to establish which balances are insured and which are not, and taking the administrative steps to stand up a new Depository Insurance National Bank to take over administering SVBs business. Access to all insured funds should be available Monday, and depositors with uninsured funds should get a mix of some funds and “receivership certificates” for the uninsured balances. So, yeah, not “totally stuck”, but anyone with balances over $250K may be…largely stuck.
• eddsh1994 4y ago
  [flagged]
  • greesil 4y ago
    Just as ridiculous (or not ridiculous) as bailing out Wall street back in 2008. Silicon Valley is officially too big to fail.
  • eastbound 4y ago
    “It will create jobs!”
    • fsdalfdsklkj 4y ago
      SV isn't known for creating jobs either. Google, a TRILLION dollar company, won't even employ overseas tech support staff, let alone domestic.
      • admax88qqq 4y ago
        Impressive gymnastics the way you managed to relate this topic back to the tried and true "Google doesn't provide support isn't that bad?" topic that HN loves so much. Is that all that qualifies as a job to you? Tech support? The other 190k people working at Google don't have jobs?
  • resource0x 4y ago
    This is not the only candidate for a bailout. There's a potential for contagion here. https://www.marketwatch.com/story/20-banks-that-are-sitting-on-huge-potential-securities-lossesas-was-svb-c4bbcafa?mod=mw_quote_news https://www.marketwatch.com/story/20-banks-that-are-sitting-...
    • ofchnofc 4y ago
      Oh no! Anyway... I can't be the only one sitting here going, "okay, fine?". Do I want individual devs screwed? NO! Do I want to watch this same cycle of bailouts play out AGAIN benefiting the capital class AGAIN because god forbid they suffer from the shit-end of the capitalism stick? God forbid they have to tighten their laces and bootstrap and all the key-buzzword-unsympathetic crap? HELL NO. edit: Since 4 neutrally-scored comments over 5+ hours is too much for this amazing, awesome website, let me elaborate here, something I can't post elsewhere (maybe if I sucked up more and lamented the impending horrible sad boohoo-y times for VCs...): Why? Why do I try? Why do I try to build things of actual persistent value, instead of just building a big financial institution, tying it to others, and then just taking bigger and bigger risks knowing a bailout is "too-big-to-fail" inevitable? It's utter fucking insanity bred by a community of people that thought they were gonna have their shot on the other side of the see-saw.
• cinquemb 4y ago
  Prob should reach out to SBF, he has a lot of political connections and familiar with these kind of situations
• jjulius 4y ago
  >All little startups, tomorrow's Google's and Facebooks, will be extinguished if we don't find a fix. This is what we call "hubris". Gary needs to settle down.
  • cma 4y ago
    It also kind of sounds like "look on the bright side" when you consider how often those example tech companies we'll be lacking a future replacement version of buy up small startups just to squash them or keep them out of hands of competitors.
  • muzz 4y ago
    He's saying entrepreneurs are special-- they are the job creators, they are the Atlases of Ayn Rand, etc-- and thus deserve to be bailed out by grandma paying more in taxes
    • JohnFen 4y ago
      It's worse than that. He's not even talking about all startups, he's talking about SV-style VC-backed startups. That's a small subset of all startups even if you only count tech.
• doesnt_know 4y ago
  > This is an extinction level event for startups and will set startups and innovation back by 10 years or more. I didn't know there was a YC backed startup with an app that lets you directly inhale your own gas. I'm sure that one isn't at any risk of extinction.
  • wellthisisgreat 4y ago
    Gas in the blockchain sense I hope
  • rexreed 4y ago
    Go figure, one singular bank failure could wipe out so many startups. Pretty remarkable how fragile the ecosystem is if that's all it takes.
    • twblalock 4y ago
      Startups are fragile by definition. Most fail.
      • rexreed 4y ago
        I wonder how many startups would have predicted "bank failure" as their root cause of failure. The problem is not the fragility of each individual startup, which everyone knows. The real issue is that one singular bank failure could tip so many over at the same time. Part of the issue is Silicon Valley-centric CEOs following guidance of Silicon Valley-centric VCs, who no surprise, recommend SVB. A little independent thinking goes a long way to make your fragile startup a bit less fragile. All these startups would have had to do is hedge their bets a bit and not go all-in with Silicon Valley and their already fragile startups wouldn't have been made that much more fragile. Besides, I'm talking about the fragility of the ecosystem, not just individual startups. While everyone knows each startup is just a flash in the pan, here one day, very likely gone the next, the same was not said about a whole ecosystem. Silicon valley as a whole seemed remarkably stable until recently.
    • muzz 4y ago
• eksx 4y ago
  FDIC mentioned that by Monday there will be access to accounts with 250k that is fdic protected. Does this statement take this into account?
  • anon291 4y ago
    At my last place, my biweekly wage was over 10k, which means that at most you can have about 25 mes, and I am neither a particularly well compensated nor particularly senior engineer. There were many making more than that. Many companies have more than 25 employees.
    • minkzilla 4y ago
      >biweekly over 10k >[not] a particularly well compensated You are living in fantasy land.
      • disgruntledphd2 4y ago
        Yeah, it's called the Bay Area.
        • astrange 4y ago
          $260k salary (not TC) is a lot! Median personal salary in SF is $96k.
        • somsak2 4y ago
          no, it's not. very few places, much less startups, are paying $260k/year in cash after deductions to a "neither a particularly well compensated nor particularly senior engineer." Take a look at levels.fyi. They'd have to be making something like $400k base, this is pure hyperbole.
    • akavi 4y ago
      To save people the math, that's 260 k$ in cash compensation (or ~mid FAANG L6 tier). I am confident in saying there were not many making more than that.
• deleted 4y ago
  [deleted]
• jzawodn 4y ago
  Can't they just issue some crypto? :-)
• balls187 4y ago
  It was bound to happen. The rest of the world weathered the pandemic; it’s time for tech bubble to burst.
• damiankennedy 4y ago
  In this situation, the reserve bank absolutely should take over SVB's assets and liabilities, that is what its for and what it can do easily and painlessly. The govt is not involved and no tax dollars are involved. No customer of SVB should be out of pocket and certainly no employee of a customer of SVB should be. The losers are the shareholders of SVB as their equity is wiped out and some of SVB's employees will lose their jobs.
• not_enoch_wise 4y ago
  Investor profits threatened by interest rates: “We’re sorry we’re laying you off, we take full responsibility, now gtfo” Investor profits threatened by unstable silicon valley financial system: “Think of the workers! The sacred obligation of payroll!”
  • pm90 4y ago
    It’s completely rational behavior albeit immoral.
• somsak2 4y ago
  remember this is the same guy that titles his self produced videos things like "my $200m startup mistake" in reference to deciding to work at Microsoft
• muzz 4y ago
  He wants "Depositors must be made whole" by the government. Amazing how quickly capitalists turn to socialists
• mehlmao 4y ago
  Founders can take a loan on the IOUs from the FDIC from VCs and make payroll. Worth watching who goes this way and who holds out, doesn't pay their employees, and begs the federal government to pay them.
• raldi 4y ago
  Forgive the naive question, but why did so many companies put all their cash in one account instead of spreading it between two or more independent banks?
  • breck 4y ago
    Some might say that this is another reason we need a public ledger where we could speak exactly about the facts rather than speculate on bits of information leaked by people with conflicts of interest.
  • etchalon 4y ago
    Because spreading out your cash like that is unmanageable.
    • raldi 4y ago
      It also sounded unmanageable the first time I heard the idea of consistently replicating databases across clusters in multiple availability zones, but ultimately the vast majority of tech companies nonetheless decide it's worth going through all that trouble to avoid existential risk in the event of a SPOF. I'm curious about the calculus that makes this tradeoff non-worthwhile when it comes to squirreling away an emergency payroll fund in a backup bank. What about that is unmanageable?
  • mike_d 4y ago
    Because corporate financial education isn't part of the YC curriculum and most small companies don't have CFOs. Large companies and smart individuals keep cash reserves in pass-thru depository products like CDARS which do exactly what you describe. You have a virtual account at Bank A that shows your balance, but the actual money is stored across hundreds or thousands of other banks across the US - each holding less than the FDIC insurance maximum.
    • icedata 4y ago
      Actually, the entire incident can be seen as an effective educational exercise.
• breck 4y ago
  I disagree with his subpoints, but I love how Garry speaks from the heart and doesn't filter it through a PR firm or lawyers. I do agree with his main point: make the receivership as short as possible. I'd hope everyone can agree on that. (Meanwhile, I'm still waiting months to log back into my https://ftx.us/ https://ftx.us/ account). I disagree with this: "This is an extinction level event for startups and will set startups and innovation back by 10 years or more. " I could easily see it being the exact opposite.
  • muzz 4y ago
    He's using scare tactics to try to get a taxpayer bailout
• muzz 4y ago
  Tan, Sacks, etc are basically practicing "never let a crisis go to waste" They only want to rig the game in their favor. These people weren't advocating things like tougher bank regulations that would have prevented this. They just happen to be on the losing side now and want a bailout.
• Animats 4y ago
  It's not that bad. FDIC: "All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors. ... As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits." Those receivership certificates can be sold or borrowed against. The discount shouldn't be large, since there are solid assets, they're just long term. But figuring out how to arrange such deals is obscure, and early offers to buy will probably be at an excessive discount. This doesn't happen often and it's not a routine type of transaction. Which means you may need expensive corporate lawyers.
  • dmix 4y ago
    Any idea what an "advanced dividend" means in practice here?
    • quesera 4y ago
      It's a partial payment against your uninsured balance. If you have $1MM of uninsured deposits, you might get $100K as an advance dividend. The importance is that this money is available quickly, while you make arrangements to do without the remainder of your funds, for a possibly-extended period of time. Until the next follow-on dividend, if any, and until you are fully whole, if ever.
• chernevik 4y ago
  This situation is not that bad and the solution is a mix of short-term belt-tightening followed by companies raising more equity. It really seems this is obvious, and that Gary is trying to avoid it. Companies will not "go extinct". Yes, they _may_ have delays making payroll, but nothing that employees cannot work through. And I doubt even that. Regulators will make some fraction of deposits available in short order and companies can function from that. It will be tight and a nuisance but it's manageable. Even if we stipulate that the next generation of tech innovation was banking at SVB, it will survive. But yes there will be actual deposit losses. At a guess these will be no more than 30%, which will take some time to emerge. No promising startup will be unable to raise capital to fill the gap. What, investors won't kick in another 30% (if that) for an idea they like? Gary's tweets about "small companies lacking treasury management" are disingenuous. The whole point of the VC ecosystem and institutions like YCombinator is to provide entrepreneurs with business support and advice they otherwise lack. Help with legal structure, accounting, hiring, benefits, etc is very much part of the VC value proposition. Well, cash management is exactly in that department. Wariness about cash management and banking risk is actually part of Gary's job. Apparently he didn't do it very well here. Well, we all make mistakes, seriously -- but I don't expect taxpayers to pay for mine. This really seems like fear mongering and special pleading to avoid equity dilution at the taxpayer's expense. Really I thought better of YC.
  • deleted 4y ago
    [deleted]
• deleted 4y ago
  [deleted]
• xyst 4y ago
  It's going to be a great reset for the tech startup landscape. If you can't pay your employees, your startup is going to zero. Besides founders, who is going to work for free? In this economy, I wouldn't even risk the "promise" that startups will pay up. If all or most of their assets were held in SIVB and were not able to withdraw or transfer out, then they are effectively hosed. Good luck folks.
• cgb223 4y ago
  Which companies specifically?
• thih9 4y ago
  “SVB failure” stands for Silicon Valley Bank collapse. > Silicon Valley Bank collapsed on Friday after a run on deposits drove the Northern California institution into insolvency, marking the largest bank failure since the financial crisis. Source: https://www.politico.com/news/2023/03/10/silicon-valley-bank-collapse-00086586 https://www.politico.com/news/2023/03/10/silicon-valley-bank... Discussed at: https://news.ycombinator.com/item?id=35096877 https://news.ycombinator.com/item?id=35096877
• noelsusman 4y ago
  It can be tempting to mock all the VC's freaking out about this, but I genuinely can't imagine how stressful this must be for a lot of people, so I"m willing to extend some grace and give people the benefit of the doubt when they let their emotions get the better of them. With that said, the government's role in a situation like this is to prevent contagion, not make you whole. If a bunch of startups go under over this then that sucks, but that alone doesn't come close to justifying any sort of government bailout.
• deleted 4y ago
  [deleted]
• hoofhearted 4y ago
  And then there was web 4.0.
• phso 4y ago
  Do you have any informartions about brazilians company like Kiwify , how the bankrupt will affect ?
• smugma 4y ago
  Looks like CA is pushing for federal backing/bailout: https://twitter.com/CAgovernor/status/1634634828204367872?s=20 https://twitter.com/CAgovernor/status/1634634828204367872?s=...
• muzz 4y ago
  This tweet looks more and more like utter BS