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I'll probably get my next paycheck or two, but I'll lose my job. You're pretty clearly saying here that I should lose my job, along with many other people, beca

I'll probably get my next paycheck or two, but I'll lose my job. You're pretty clearly saying here that I should lose my job, along with many other people, because of the bank at which my company's cash is stored. > Perhaps they shouldn't keep money in the bank in the first place, but find other uses for them. I work at a small startup that's raised five million dollars. Not a huge amount of money, but obviously losing all but 250k would be extremely damaging. You're talking about concepts of fiscal responsibility here, but then you're suggesting that businesses should deploy virtually all of their cash and keeping close to nothing in reserve. Our founders are extremely fiscally prudent and purposely keep a very low burn rate, which is exactly why that money is in the bank instead of being used elsewhere.

FartyMcFarter 4y ago
I'm not sure your founders are as "extremely" prudent as you claim them to be. For example, couldn't they have spread their funds throughout more banks instead of putting their eggs in one basket?
- grugagag 4y ago
  Apparently they did that on purpose to be better able get a view on the activity of the money they poured in. Someone on a different thread is pointing to the levers VCs had in SVB for this exact purpose.
  - rmilk 4y ago
    Exactly. If you’re forced to use SVB because of your founders, you don’t have a recourse on the bank. But there is also a risk question that companies are responsible for that I see is glossed over. No, you shouldn’t have to spread your business accounts to limit them to 250k. But you must know it’s not insured above this, just like a money market account is not a guaranteed rate of return or even guaranteed against capital loss. I’m just spitballing, but for example what was the rate on a “money market” checking at SVB versus other larger national banks? If it was much higher, it immediately indicates higher risk in a business checking account at SVB to get those rates. You can see this way back with the old junk bond / Lincoln Savings fiasco of the 1980s, or with 2008 MBS, or CD accounts in early 2000s.
    - hgsgm 4y ago
      > forced to use SVB because of your founder Investor not founder.
- masterjack 4y ago
  Are you really suggesting they open up 20 different bank accounts? And not only pay the monthly account fees but also pay a bookkeeper to upload statements for all 20 banks into the accounting system? And have appropriate controls on all money movements? And float money between the accounts each time payroll or some large expense is run? And follow the financial results of all of those banks in order to find signs of weakness? Id rather be in a world where businesses don’t have to spend so much time playing games with their bank accounts and just trust that their money is safe, which is why the fdic needs to guarantee the deposits.
  - QuercusMax 4y ago
    Services like this exist: https://www.investopedia.com/terms/c/certificate-of-deposit-account-registry-service.asp https://www.investopedia.com/terms/c/certificate-of-deposit-...
  - FartyMcFarter 4y ago
    > Are you really suggesting they open up 20 different bank accounts? No. I said that putting all the money in one bank account is not extremely prudent, which seems obvious given the circumstances. I'm pretty sure that there are individuals paying attention to this, so I don't think it's too weird to ask businesses to do so as well.
  - klipt 4y ago
    > And follow the financial results of all of those banks in order to find signs of weakness? Well no, if all your deposits are below the 250k fully insured limit, then you don't have to worry about the banks collapsing.
  - shadowgovt 4y ago
    That sounds like just another cost of doing business. Companies RAID-stripe the data on their hard drives, they can pay somebody to spread the risk in their finances. (At a certain scale this eventually becomes inevitable. Google actually has a huge real estate and finances arm precisely because they have the kind of money pool that is impacted by things like nation-state failure and changes to the tax code in 50 states).
- idopmstuff 4y ago
  So anybody who raises money should put a max of 250k into any given bank? My CEO should spend his time managing 20 different bank accounts? I just think that if we look at it from the big picture - what's best for the country/society/etc. - that we're collectively much better off if a business that puts its money into a decades-old, reputable financial institution can count on it being there the next week. (Also I do feel like I should clarify that I'm using my company as a kind of general example... I have no idea where our money is stored and I'm on paternity leave at the moment so just going to hang out with my new kid and hope this all works out).
  - QuercusMax 4y ago
    There are services that will spread balances across tons of accounts. The problem is that YC made people keep all their startup's money only in SVB instead of spreading it around.
    - idopmstuff 4y ago
      But is that a good thing for society? Adding a rent-seeking middleman that doesn't actually contribute anything except a technical workaround for an issue that can be solved directly by the governemnt?
      - scottLobster 4y ago
        It's called risk management, it costs money and it's something anyone running a business should be familiar with. Don't run your company like a multimillion dollar lemonade stand.
    - eldritch_4ier 4y ago
      YC doesn’t make you keep your money anywhere, they don’t even suggest any place or even say anything about startup banking (unless you were to ask one of the partners for advice). Even a cynical take would suggest they’d prioritize their portcos who launched banks for startups (like Brex), but even still in my experience they haven’t even done that.
- pbourke 4y ago
  Would you suggest that every small business in the US with working capital over the FDIC limits do something like this? It would be a massive waste of resources. FDIC insurance exists to stabilize this part of the financial system.
  - FartyMcFarter 4y ago
    Yes, I would definitely suggest and recommend for businesses to not have a single point of failure for something as important as their working capital.
  - rmilk 4y ago
    There is a risk question that companies are responsible for that I see is glossed over. No, you shouldn’t have to spread your business accounts to limit them to 250k. But you must know it’s not insured above this, just like a money market account is not a guaranteed rate of return or even guaranteed against capital loss. Have lines of credit with alternate banks, or insurance on that additional money. Or, just like when the market tanks, you suck it up and get back 80% of your capital on deposit because you couldn’t foresee a money market checking account could lose capital even though it’s spelled out on EVERY SINGLE statement and offering letter from the bank.
  - lotsofpulp 4y ago
    > FDIC insurance exists to stabilize this part of the financial system. Up to $250k per account holder per bank.
    - pbourke 4y ago
      Yes, that is the letter of the law. The intent, given that the FDIC emerged from the Great Depression, is to prevent bank runs. Most banks with a large retail deposit base are immune from bank runs. SVB is unique in that it didn’t have a large retail deposit base yet also had a bimodal customer distribution (financially sophisticated VCs and later-stage startups/enterprises and early stage startups which have the financial sophistication of your local auto mechanic). No acquiring bank will want to touch SVB because of its lack of retail deposits - the risk of account holders fleeing at the earliest opportunity is very high. That forecloses one of the FDIC’s main tools for resolving a bank collapse - especially one of this magnitude. So we have a very unique situation here: a large mostly commercial bank that, unlike most large commercial banks, has a bunch of mom-and-pop level customers. I don’t know what the solution is, but hopefully it will go in the direction of minimizing impact on these small businesses.
- moomoo11 4y ago
  should have put it into gold right?
youngtaff 4y ago
The company is unlikely to lose all but $250,000 as SVB (reportedly)still has plenty of assets it’s just some of the bonds they hold are under water due to interest rate rises You should question why $5mn was kept in a normal bank (with an unusual customer profile) rather than being placed in money market funds etc., or why the company didn’t insure the funds above $250,000
logichurts 4y ago
You know in advance what the FDIC insured limit is. Just like any other insurance policy. You can't cry about it after and expect special treatment.
anon291 4y ago
You do not have a right to a job at the taxpayers expense. We all feel for you and are rooting for the workers but no one has an inmate right to others money. Especially when the right being demanded is size figure salaries. If you were to lose your job, there is a standardized insurance that kicks in that all Americans get. You are demanding special, better treatment at the tax payers expense. Look, everyone on this forum is going to be affected by this. I myself was laid off a few weeks ago due to the tech bubble. It's still not right to demand other people's money and act entitled. We all get it's hard out there right now.
- icelancer 4y ago
  > You do not have a right to a job at the taxpayers expense. Ignoring the fact that millions of Americans literally have this, the taxpayers are on the hook for zero percent of the depositor restorations in SVB.
treis 4y ago
This is a red herring though. Your company isn't losing 4.75 million. They're likely going to lose 0-10% of that. The actual question is should tax payers give a company that has ~4.5 million in cash and is worth some multiple of that some free money? And that should be an emphatic no.

FartyMcFarter 4y ago

I'm not sure your founders are as "extremely" prudent as you claim them to be. For example, couldn't they have spread their funds throughout more banks instead of putting their eggs in one basket?

grugagag 4y ago
Apparently they did that on purpose to be better able get a view on the activity of the money they poured in. Someone on a different thread is pointing to the levers VCs had in SVB for this exact purpose.
- rmilk 4y ago
  Exactly. If you’re forced to use SVB because of your founders, you don’t have a recourse on the bank. But there is also a risk question that companies are responsible for that I see is glossed over. No, you shouldn’t have to spread your business accounts to limit them to 250k. But you must know it’s not insured above this, just like a money market account is not a guaranteed rate of return or even guaranteed against capital loss. I’m just spitballing, but for example what was the rate on a “money market” checking at SVB versus other larger national banks? If it was much higher, it immediately indicates higher risk in a business checking account at SVB to get those rates. You can see this way back with the old junk bond / Lincoln Savings fiasco of the 1980s, or with 2008 MBS, or CD accounts in early 2000s.
  - hgsgm 4y ago
    > forced to use SVB because of your founder Investor not founder.
masterjack 4y ago
Are you really suggesting they open up 20 different bank accounts? And not only pay the monthly account fees but also pay a bookkeeper to upload statements for all 20 banks into the accounting system? And have appropriate controls on all money movements? And float money between the accounts each time payroll or some large expense is run? And follow the financial results of all of those banks in order to find signs of weakness? Id rather be in a world where businesses don’t have to spend so much time playing games with their bank accounts and just trust that their money is safe, which is why the fdic needs to guarantee the deposits.
- QuercusMax 4y ago
  Services like this exist: https://www.investopedia.com/terms/c/certificate-of-deposit-account-registry-service.asp https://www.investopedia.com/terms/c/certificate-of-deposit-...
- FartyMcFarter 4y ago
  > Are you really suggesting they open up 20 different bank accounts? No. I said that putting all the money in one bank account is not extremely prudent, which seems obvious given the circumstances. I'm pretty sure that there are individuals paying attention to this, so I don't think it's too weird to ask businesses to do so as well.
- klipt 4y ago
  > And follow the financial results of all of those banks in order to find signs of weakness? Well no, if all your deposits are below the 250k fully insured limit, then you don't have to worry about the banks collapsing.
- shadowgovt 4y ago
  That sounds like just another cost of doing business. Companies RAID-stripe the data on their hard drives, they can pay somebody to spread the risk in their finances. (At a certain scale this eventually becomes inevitable. Google actually has a huge real estate and finances arm precisely because they have the kind of money pool that is impacted by things like nation-state failure and changes to the tax code in 50 states).
idopmstuff 4y ago
So anybody who raises money should put a max of 250k into any given bank? My CEO should spend his time managing 20 different bank accounts? I just think that if we look at it from the big picture - what's best for the country/society/etc. - that we're collectively much better off if a business that puts its money into a decades-old, reputable financial institution can count on it being there the next week. (Also I do feel like I should clarify that I'm using my company as a kind of general example... I have no idea where our money is stored and I'm on paternity leave at the moment so just going to hang out with my new kid and hope this all works out).
- QuercusMax 4y ago
  There are services that will spread balances across tons of accounts. The problem is that YC made people keep all their startup's money only in SVB instead of spreading it around.
  - idopmstuff 4y ago
    But is that a good thing for society? Adding a rent-seeking middleman that doesn't actually contribute anything except a technical workaround for an issue that can be solved directly by the governemnt?
    - scottLobster 4y ago
      It's called risk management, it costs money and it's something anyone running a business should be familiar with. Don't run your company like a multimillion dollar lemonade stand.
  - eldritch_4ier 4y ago
    YC doesn’t make you keep your money anywhere, they don’t even suggest any place or even say anything about startup banking (unless you were to ask one of the partners for advice). Even a cynical take would suggest they’d prioritize their portcos who launched banks for startups (like Brex), but even still in my experience they haven’t even done that.
pbourke 4y ago
Would you suggest that every small business in the US with working capital over the FDIC limits do something like this? It would be a massive waste of resources. FDIC insurance exists to stabilize this part of the financial system.
- FartyMcFarter 4y ago
  Yes, I would definitely suggest and recommend for businesses to not have a single point of failure for something as important as their working capital.
- rmilk 4y ago
  There is a risk question that companies are responsible for that I see is glossed over. No, you shouldn’t have to spread your business accounts to limit them to 250k. But you must know it’s not insured above this, just like a money market account is not a guaranteed rate of return or even guaranteed against capital loss. Have lines of credit with alternate banks, or insurance on that additional money. Or, just like when the market tanks, you suck it up and get back 80% of your capital on deposit because you couldn’t foresee a money market checking account could lose capital even though it’s spelled out on EVERY SINGLE statement and offering letter from the bank.
- lotsofpulp 4y ago
  > FDIC insurance exists to stabilize this part of the financial system. Up to $250k per account holder per bank.
  - pbourke 4y ago
    Yes, that is the letter of the law. The intent, given that the FDIC emerged from the Great Depression, is to prevent bank runs. Most banks with a large retail deposit base are immune from bank runs. SVB is unique in that it didn’t have a large retail deposit base yet also had a bimodal customer distribution (financially sophisticated VCs and later-stage startups/enterprises and early stage startups which have the financial sophistication of your local auto mechanic). No acquiring bank will want to touch SVB because of its lack of retail deposits - the risk of account holders fleeing at the earliest opportunity is very high. That forecloses one of the FDIC’s main tools for resolving a bank collapse - especially one of this magnitude. So we have a very unique situation here: a large mostly commercial bank that, unlike most large commercial banks, has a bunch of mom-and-pop level customers. I don’t know what the solution is, but hopefully it will go in the direction of minimizing impact on these small businesses.
moomoo11 4y ago
should have put it into gold right?

youngtaff 4y ago

The company is unlikely to lose all but $250,000 as SVB (reportedly)still has plenty of assets it’s just some of the bonds they hold are under water due to interest rate rises You should question why $5mn was kept in a normal bank (with an unusual customer profile) rather than being placed in money market funds etc., or why the company didn’t insure the funds above $250,000

logichurts 4y ago

You know in advance what the FDIC insured limit is. Just like any other insurance policy. You can't cry about it after and expect special treatment.

anon291 4y ago

You do not have a right to a job at the taxpayers expense. We all feel for you and are rooting for the workers but no one has an inmate right to others money. Especially when the right being demanded is size figure salaries. If you were to lose your job, there is a standardized insurance that kicks in that all Americans get. You are demanding special, better treatment at the tax payers expense. Look, everyone on this forum is going to be affected by this. I myself was laid off a few weeks ago due to the tech bubble. It's still not right to demand other people's money and act entitled. We all get it's hard out there right now.

icelancer 4y ago
> You do not have a right to a job at the taxpayers expense. Ignoring the fact that millions of Americans literally have this, the taxpayers are on the hook for zero percent of the depositor restorations in SVB.

treis 4y ago

This is a red herring though. Your company isn't losing 4.75 million. They're likely going to lose 0-10% of that. The actual question is should tax payers give a company that has ~4.5 million in cash and is worth some multiple of that some free money? And that should be an emphatic no.