4 ms·

If this happens the companies will immediately close up shop. So you get your last 2 weeks of pay then no more, no severance, nothing.

by Me1000 4y ago

muzz 4y ago
If a company wants to shoot itself in the foot like that
- Tuna-Fish 4y ago
  If you are a director of a company facing such a situation, it's what you want to do. Because if you don't, you become personally liable for the missed payroll. Do you want to close up shop and say "this startup died because of SVB, on to start another one", but keep your car and your house, or do you want to risk losing literally everything you own and then end up with loads of new debt on top of that.
  - muzz 4y ago
    Depends if you think the eventual outcome is worth more. People used to second-mortgage their house to start small businesses where the best-case payoff is much less than these tech companies-- some of which are apparently the next Google or Facebook according to the head of YC on CNBC yesterday
Alex3917 4y ago
> If this happens the companies will immediately close up shop. If their bank accounts get frozen for a week, they'll just lay everyone off and then hire them all back a week later with a signing bonus to cover their missed days. No one is going to permanently shut down their company because their bank is closed for a couple days. Maybe a few lucky executives will accidentally get their vesting accelerated, and a few startups that were on the brink of collapsing anyway might be pushed over the edge, but beyond that life will go on as usual.
smugma 4y ago
As Garry wrote, companies would furlough before closing up shop. You get your paycheck, and then you're told you're furloughed until FDIC does their thing. This protects the company and the founders. This may be better or worse for workers than being laid off.
- Me1000 4y ago
  That would certainly be better, but companies generally have more expenses than payroll. Lets say hypothetically I'm a healthy cloud computing provider startup and a bunch of revenue comes from startups. If those companies can't pay me, then I can't pay my own costs. That means I have to shut down and all the businesses on my platform get screwed over too. Bigger companies will be able to float resources for a bit, but if it takes the FDIC more than a few months to sort it out there will be large second order effects. I hope this hypothetical stays hypothetical, if the FDIC can announce that SVB has been acquired and all the deposits will be honored this will all be moot. But any company with a large deposit at SVB should probably be working off the assumption that they're going to have to make that $250k of insured deposits last for a while. At least until new information is released.
  - landemva 4y ago
    > if it takes the FDIC more than a few months to sort it out Why do you think it may take months for FDIC to do their job? I think FDIC will pay the 250k on every account before Monday morning. Anything beyond 250k is not covered by 'deposit insurance'. > acquired and all the deposits will be honored SVB is effectively bankrupt. Buyers are going to get a good deal, and not sink their own bank.
    - zamnos 4y ago
      $250k will be in every account Monday morning, agreed on that. It's everything above $250k, which is substantial, and which companies need, that will take a while to sort out. It's true that everything above $250k isn't covered by insurance, which means they may not get it, but SVB has assets, those assets will get sold, and first up to those assets is those who had bank accounts and to make them whole.

If this happens the companies will immediately close up shop. So you get your last 2 weeks of pay then no more, no severance, nothing.

by Me1000 4y ago

If this happens the companies will immediately close up shop. So you get your last 2 weeks of pay then no more, no severance, nothing.

muzz 4y ago

If a company wants to shoot itself in the foot like that

Tuna-Fish 4y ago
If you are a director of a company facing such a situation, it's what you want to do. Because if you don't, you become personally liable for the missed payroll. Do you want to close up shop and say "this startup died because of SVB, on to start another one", but keep your car and your house, or do you want to risk losing literally everything you own and then end up with loads of new debt on top of that.
- muzz 4y ago
  Depends if you think the eventual outcome is worth more. People used to second-mortgage their house to start small businesses where the best-case payoff is much less than these tech companies-- some of which are apparently the next Google or Facebook according to the head of YC on CNBC yesterday

Alex3917 4y ago

> If this happens the companies will immediately close up shop. If their bank accounts get frozen for a week, they'll just lay everyone off and then hire them all back a week later with a signing bonus to cover their missed days. No one is going to permanently shut down their company because their bank is closed for a couple days. Maybe a few lucky executives will accidentally get their vesting accelerated, and a few startups that were on the brink of collapsing anyway might be pushed over the edge, but beyond that life will go on as usual.

smugma 4y ago

As Garry wrote, companies would furlough before closing up shop. You get your paycheck, and then you're told you're furloughed until FDIC does their thing. This protects the company and the founders. This may be better or worse for workers than being laid off.

Me1000 4y ago
That would certainly be better, but companies generally have more expenses than payroll. Lets say hypothetically I'm a healthy cloud computing provider startup and a bunch of revenue comes from startups. If those companies can't pay me, then I can't pay my own costs. That means I have to shut down and all the businesses on my platform get screwed over too. Bigger companies will be able to float resources for a bit, but if it takes the FDIC more than a few months to sort it out there will be large second order effects. I hope this hypothetical stays hypothetical, if the FDIC can announce that SVB has been acquired and all the deposits will be honored this will all be moot. But any company with a large deposit at SVB should probably be working off the assumption that they're going to have to make that $250k of insured deposits last for a while. At least until new information is released.
- landemva 4y ago
  > if it takes the FDIC more than a few months to sort it out Why do you think it may take months for FDIC to do their job? I think FDIC will pay the 250k on every account before Monday morning. Anything beyond 250k is not covered by 'deposit insurance'. > acquired and all the deposits will be honored SVB is effectively bankrupt. Buyers are going to get a good deal, and not sink their own bank.
  - zamnos 4y ago
    $250k will be in every account Monday morning, agreed on that. It's everything above $250k, which is substantial, and which companies need, that will take a while to sort out. It's true that everything above $250k isn't covered by insurance, which means they may not get it, but SVB has assets, those assets will get sold, and first up to those assets is those who had bank accounts and to make them whole.