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I am naive in this area. But what I don't really understand is.. why are all of these start ups using Silicon Valley Bank? It's a relatively small regional bank

I am naive in this area. But what I don't really understand is.. why are all of these start ups using Silicon Valley Bank? It's a relatively small regional bank, that happens to have a ton of cash. Why aren't start ups using Bank of America, Wells Fargo, etc. It's odd to me that >90% of a sector uses this one regional bank.

sneak 4y ago
As I understand it, it was a matter of personal connection. Also, if most/all of your vendors and customers are there, payments settle faster (historically).
NegativeLatency 4y ago
Some startups do use those other banks
bumbledraven 4y ago
https://www.fastcompany.com/90864382/silicon-valley-bank-wasnt-your-typical-bank-which-is-why-its-closure-presents-such-a-big-risk https://www.fastcompany.com/90864382/silicon-valley-bank-was... : > In many cases, startups exclusively banked with SVB because doing so was listed as a covenant of their debt! > So CEOs across the tech sector on March 9 faced a hard choice: You can pull your deposits from the bank in order to save them, but then you would be in breach of covenant, and at risk of default on your venture debt. Of course, the alternative was that you risked losing everything if the bank failed. Many chose to hold tight as SVB’s outright failure seemed outlandish even a few short hours ago.
- hayd 4y ago
  > doing so was listed as a covenant of their debt! why??
im_down_w_otp 4y ago
We used to keep all our operating capital in a different bank, but then we did a venture debt deal to bring some AR cash forward, and the terms placed on us by the venture debt lender required us to move all our money to SVB, where they already had systems & experience in being able to monitor the accounts. The irony is, if this doesn’t resolve itself relatively soon, we won’t be able to pay down the loan precisely _and only_ because of the terms of the loan that they set in the first place. I don’t know yet how it’s all going to shake out, but I’m pretty excited to have the experience of trying to navigate through all of it.
paulddraper 4y ago
> relatively small regional bank Top 1% of U.S. banks is not "relatively small." Technically regional, but had locations across the country. I'm in Utah there's a location across the street from my office. > why It was tech-forward and offered debt financing based on ARR. Why do >90% of online retailer companies use Shopify? If it's better, people will use it.

sneak 4y ago

As I understand it, it was a matter of personal connection. Also, if most/all of your vendors and customers are there, payments settle faster (historically).

NegativeLatency 4y ago

Some startups do use those other banks

bumbledraven 4y ago

https://www.fastcompany.com/90864382/silicon-valley-bank-wasnt-your-typical-bank-which-is-why-its-closure-presents-such-a-big-risk https://www.fastcompany.com/90864382/silicon-valley-bank-was... : > In many cases, startups exclusively banked with SVB because doing so was listed as a covenant of their debt! > So CEOs across the tech sector on March 9 faced a hard choice: You can pull your deposits from the bank in order to save them, but then you would be in breach of covenant, and at risk of default on your venture debt. Of course, the alternative was that you risked losing everything if the bank failed. Many chose to hold tight as SVB’s outright failure seemed outlandish even a few short hours ago.

hayd 4y ago
> doing so was listed as a covenant of their debt! why??

im_down_w_otp 4y ago

We used to keep all our operating capital in a different bank, but then we did a venture debt deal to bring some AR cash forward, and the terms placed on us by the venture debt lender required us to move all our money to SVB, where they already had systems & experience in being able to monitor the accounts. The irony is, if this doesn’t resolve itself relatively soon, we won’t be able to pay down the loan precisely _and only_ because of the terms of the loan that they set in the first place. I don’t know yet how it’s all going to shake out, but I’m pretty excited to have the experience of trying to navigate through all of it.

paulddraper 4y ago

> relatively small regional bank Top 1% of U.S. banks is not "relatively small." Technically regional, but had locations across the country. I'm in Utah there's a location across the street from my office. > why It was tech-forward and offered debt financing based on ARR. Why do >90% of online retailer companies use Shopify? If it's better, people will use it.