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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.

by tekla 4y ago

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
[deleted]
boc 4y ago
SVB didn’t make a risky bet- they did the opposite and locked deposits in a very conservative bond strategy.
- tekla 4y ago
  No it wasn't conservative. It was very risky completely based on assuming almost 0% interest rates over 10 years and fully locked in. That's clearly a crazy position to take. Every small increase in interest rates has a outsized effect on these bonds.
  - boc 4y ago
    It's not that crazy considering we saw 10 years of 0% interest rates... well for the past 10 years. If anything it was the status quo. Only in hindsight does it look crazy.
    - JohnFen 4y ago
      That the interest rates were at 0% for so long implies that the rates will have to be going up in the near future. They can't stay at 0 forever, and 10 years is a very long time. The obviously risky bet is that the rates would stay 0.
      - boc 4y ago
        That's just gambler's fallacy. If you said the same thing in 2018 you'd have just as much evidence, but you would have been wrong.
        JohnFen 4y ago
        How would I have been wrong? They didn't stay at zero forever.
        boc 4y ago
        In 2018 some countries had started experimenting with negative interest rates, so 0 isn’t the lower bound. Secondly, you would have been wrong for the next ~3 years. That’s a long time to be on the wrong side of a bet. Long term nothing is guaranteed of course.
murderfs 4y ago
Sorry, are you saying that depositing money in a bank account is a risky dumb bet?
- tekla 4y ago
  When the majority is uninsured, yep.
rexreed 4y ago
I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it's a "sky is falling" situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups? Pretty remarkable how fragile the ecosystem is if that's all it takes.
- blibble 4y ago
  seems as if banks don't want VC startups as customers
  - rexreed 4y ago
    Is this from personal experience? I can tell you a lot of East Coast, Southern US, non-Silicon Valley and non-US Startups have no problems finding banking partners outside of SVB. The adage that only SVB knows how to bank startups hasn't been true for decades.
    - JohnFen 4y ago
      Honestly, it hasn't been true ever.
- dragonwriter 4y ago
  > I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it’s a “sky is falling” situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups? From most accounts it seems to be a very tight ecosystem with a lot of close relationships between VCs, service providers, and serial founders. Very easy to see how it could develop high-impact dependencies that are very close to single points of failure.
  - rexreed 4y ago
    Much of the Silicon Valley ecosystem are these sort of tight loops: VCs / law firms / banks / accounting firms / HR firms / marketing agencies / senior management / key hires / etc. It's a tight clique. If you're in with the right circles, you're in with all of it. For a community that prides itself on innovation and disruption, there's remarkably very little of it when it comes to operations. Much of it is herd mentality, from the investing decisions to even the structure of HR. C-level execs also float between these circle of companies, bringing the same decisions with them everywhere.

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.

by 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

[deleted]

boc 4y ago

SVB didn’t make a risky bet- they did the opposite and locked deposits in a very conservative bond strategy.

tekla 4y ago
No it wasn't conservative. It was very risky completely based on assuming almost 0% interest rates over 10 years and fully locked in. That's clearly a crazy position to take. Every small increase in interest rates has a outsized effect on these bonds.
- boc 4y ago
  It's not that crazy considering we saw 10 years of 0% interest rates... well for the past 10 years. If anything it was the status quo. Only in hindsight does it look crazy.
  - JohnFen 4y ago
    That the interest rates were at 0% for so long implies that the rates will have to be going up in the near future. They can't stay at 0 forever, and 10 years is a very long time. The obviously risky bet is that the rates would stay 0.
    - boc 4y ago
      That's just gambler's fallacy. If you said the same thing in 2018 you'd have just as much evidence, but you would have been wrong.
      - JohnFen 4y ago
        How would I have been wrong? They didn't stay at zero forever.
        boc 4y ago
        In 2018 some countries had started experimenting with negative interest rates, so 0 isn’t the lower bound. Secondly, you would have been wrong for the next ~3 years. That’s a long time to be on the wrong side of a bet. Long term nothing is guaranteed of course.

murderfs 4y ago

Sorry, are you saying that depositing money in a bank account is a risky dumb bet?

tekla 4y ago
When the majority is uninsured, yep.

rexreed 4y ago

I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it's a "sky is falling" situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups? Pretty remarkable how fragile the ecosystem is if that's all it takes.

blibble 4y ago
seems as if banks don't want VC startups as customers
- rexreed 4y ago
  Is this from personal experience? I can tell you a lot of East Coast, Southern US, non-Silicon Valley and non-US Startups have no problems finding banking partners outside of SVB. The adage that only SVB knows how to bank startups hasn't been true for decades.
  - JohnFen 4y ago
    Honestly, it hasn't been true ever.
dragonwriter 4y ago
> I know this is (was) downvoted a lot, but I understand this sentiment. If you read the comments above, it’s a “sky is falling” situation for many startups in the Silicon Valley sphere of influence. How is it that the silicon valley tech ecosystem could be in a position where one singular bank failure could wipe out so many startups? From most accounts it seems to be a very tight ecosystem with a lot of close relationships between VCs, service providers, and serial founders. Very easy to see how it could develop high-impact dependencies that are very close to single points of failure.
- rexreed 4y ago
  Much of the Silicon Valley ecosystem are these sort of tight loops: VCs / law firms / banks / accounting firms / HR firms / marketing agencies / senior management / key hires / etc. It's a tight clique. If you're in with the right circles, you're in with all of it. For a community that prides itself on innovation and disruption, there's remarkably very little of it when it comes to operations. Much of it is herd mentality, from the investing decisions to even the structure of HR. C-level execs also float between these circle of companies, bringing the same decisions with them everywhere.