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I'm struck by how many comments imply a certain amount of, "It was obvious" to this whole story. Yet a lot of startups clearly were all in with SVB. So what's
by pugworthy 4y ago
I'm struck by how many comments imply a certain amount of, "It was obvious" to this whole story.
Yet a lot of startups clearly were all in with SVB.
So what's the real lesson here for a startup?
- pickovven 4y agoThere's not really a lesson here about running a start-up for founders. However there's definitely a lesson here about how societies work that Silicon Valley could better internalize.
- gtop3 4y ago> So what's the real lesson here for a startup? Be careful of what hard dependencies you choose. The more dependent you are on a third party, or the more dependencies you have, the higher your black swan risk is. Of course, dependencies are a requirement to do business.
- nonethewiser 4y agoExcept in this case you want more “dependencies.” Not only to reduce risk but to maximize FDIC insurance.
- ashwagary 4y ago>Be careful of what hard dependencies you choose. >Except in this case you want more “dependencies.” More specifically, if you must have 3rd party dependencies, make sure you fully understand the risks, distribute exposure to adequately minimize central points of failure, and have failover procedures in place to reduce possible downtime. The technical crowd that successfully run high-uptime web infrastructure with demanding SLAs generally understand this idea very well.
- toast0 4y agoa) when you raise millions of dollars, don't set it in one account, figure out how to get deposit insurance. Many banks offer programs to spread deposits across many institutions, so it's not like you necessarily need to administer a lot of accounts directly. b) don't bank where Peter Thiel and his friends bank. Cause they're panicy. Probably try to avoid anything he and his friends use heavily without commitments, where them pulling out will cause major immediate issues.
- kvetching 4y agoSo essentially what you're saying is people should open a new account for every $250k they have, so their money is insured. Insane that this is something that people now need to worry about.
- baq 4y agoThis was always true.
- tlamponi 4y ago> So essentially what you're saying is people should open a new account for every $250k they have OP mentioned that there might be a service for that, and potentially also insurance that you can take out yourself for higher amounts. > Insane that this is something that people now need to worry about. Always has been, that is if you were just somewhat risk averse - more than one (unrelated!) bank account has always made sense. FWIW, here in the EU we're only covered until 100k €, so 2.5 times as many banks required to spread safely ;-P But, a lot of people do not need to have the cash around all the time, so one can but a big amount into relatively safe securities like S&P500 or for lower risk, which might be preferred here, gov bonds, and keep only the cash on hand for a few months of your expenses, which means most of the time two banks are enough, and having an account on two unrelated banks makes sense anyway - as if one has a bank run or fails completely you have still access to the cash on the other, for short-term things. For companies this can work too, but they need a constant revenue stream matching their normal monthly expenses (e.g., salaries, office rents, ...) for it to work best.
- deleted 4y ago[deleted]
- CPLX 4y agoNearly every bank that does reasonable amounts of commercial services has a product that just does this for you. Googling FDIC sweep account will yield plenty of examples. There are also ones that will hold T bills or similar as well. It’s abstracted away from you and trivial to do. These startups just didn’t do it.
- 4y ago
- dylan604 4y agoIf there's only one back that's willing to fund your venture, maybe you want to do further due diligence on why they'd be willing to go against the odds. Is it really "they believe in what you're trying to do" or is it they are so much less risk averse that maybe they're playing a little loose and fast in other areas that might also be a signal? The more I keep reading about SVB, the more cultish it sounds.
- smsm42 4y agoThere needs to be a startup allowing to distribute deposits between bank accounts and operate them as single aggregate account. So that other startups won't keep their money all in the same bank. Not sure if I'm kidding or not.
- jen20 4y agohttps://www.intrafi.com/ https://www.intrafi.com/
- JumpCrisscross 4y ago> needs to be a startup allowing to distribute deposits between bank accounts and operate them as single aggregate account This is a common banking feature called sweep.
- CPLX 4y agoThis has been around since there has been FDIC insurance. This whole thing reminds me of the regular phenomenon where people in Silicon Valley think they are geniuses because they discovered SRO’s or buses or the fact that you can dig tunnels in the ground for cars or something.
- smsm42 4y agoI know this exists, I have an account like that. The question is why people aren't using it more then?
- fwlr 4y agoI’d argue the real lesson here is that startups with VC money can’t afford to treat their bank account as a black-boxed third party API. Hire a risk-averse financial analyst as CFO early on and task them with the responsibility of making your financial holdings bulletproof to as many different economic shocks as possible.