12 ms·

Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure, while the most pointless businesses surf by on their founders’ access to inh

by reb 4y ago

Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure, while the most pointless businesses surf by on their founders’ access to inherited wealth and political power. Any revenge on them will be short-lived and will have serious, lasting consequences for middle class workers throughout the industry. For anyone reading this who doesn’t already know: startups aren’t all snotty trust fund kids making $300k+ selling AI deodorant on the blockchain. As I said on another post this weekend, I’ll remember the comments I’m reading here for the rest of my life.

idopmstuff 4y ago
Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech.
- Jtsummers 4y ago
  What contagion? How is this going to spread to the rest of the US that isn't actually dependent upon any of these startups or this bank? No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy.
  - idopmstuff 4y ago
    SVB was the sixteenth largest bank in the US. When businesses see that their money isn't safe in the sixteenth largest bank, they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. > No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy. That doesn't matter in the slightest. Companies don't do deep evaluations of the financial risks of their banks (as clearly evidenced by what's happening right now). They'll flee from what they perceive as unsafe into what they perceive as safe, regardless of balance sheet realities.
    - Jtsummers 4y ago
      > they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. One of the primary issues being discussed is the insured limits at banks, and the uncertainty on whether depositors can be made "whole" (it's unclear whether people saying that mean 100% or something close to 100%, so I'm putting it in quotes, some people are being really loose with their terms in this thread). Why the fuck would people, given that context, ever move "all of their money" to only the biggest 3 or 4 institutions and increase their risk by consolidating in exactly the same way that caused the current problems? If anything this is a potential boon for the many smaller banks as they can gain additional depositors as people wise up to their risk exposure.
      - akavi 4y ago
        Because if there was a run on JP Morgan, the US government would absolutely "bail out" depositors. Consolidating increases the risk of a bank run, decreases the risk to the individual depositor.
        Jtsummers 4y ago
        I can see the logic of that, "Let's act irrationally together and force the government to bail us out next time we make a run on our own bank." Or they can act rationally, distribute (manually or through existing methods) their cash across multiple banks so that their risk exposure is lower and they don't have to depend on the government maybe, possibly, bailing them out. You know, the thing they'd have done if they'd hired financial managers in the first place (which obviously they didn't, or they hired incompetent ones).
        throw2311 4y ago
        It's not irrational to act in your own interest. It's irrational to suppose that everyone should act in the majorities interest.
        4y ago
- wpietri 4y ago
  If you're claiming that startups are so systemically important that they need special protection, then you are also saying that they are so systemically dangerous that they need much more aggressive regulation. Is that really what you want?
  - x0x0 4y ago
    That's a very odd way of stating "here's a sector that will be badly hurt if the contents of their checking accounts disappear with an unknown timeline and percentage recovered." By that rubric, you could perfectly well claim that your accountant, laundromat, and lawn care companies are systematically important, because they'd fire their employees if their checking accounts disappeared.
    - wpietri 4y ago
      Sure, so I'm saying those things are not systemically vital such that they should be exempt from the consequences of their market choices. You're the one claiming there will be contagion here. I don't think that's the case. If a bunch of unprofitable companies with bad treasury management go under, I think the rest of the economy will be fine. Companies go out of business every day. If you are claiming that tech is somehow special such that contagion will harm the wider economy, as was the case with mortgage-backed securities in 2008, then any taxpayer-funded bailout should be a one-time deal that goes along with enough regulation so that contagion is no longer a risk in the future.
      - x0x0 4y ago
        > You're the one claiming there will be contagion here. In the sense that I never said that, sure. The only thing I claimed, even implicitly, is firing a bunch of people because their employer's cash disappeared would be bad.
        wpietri 4y ago
        No, you explicitly used the word contagion: "If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech." That has a technical meaning in finance: https://en.wikipedia.org/wiki/Financial_contagion https://en.wikipedia.org/wiki/Financial_contagion
- MrMan 4y ago
  that's a lie. and if there is contagion it won't be stemmed by bailing you as a depositor out, we will need that money elsewhere to shore up the system. good luck to you
- BeFlatXIII 4y ago
  Perhaps we ought to stop paying off the hostage-takers and let things follow their natural course.
- Gibbon1 4y ago
  People saying that depositors need to be ratfucked reminds me of a guy writing about living through the great depression. First he knew about it was one morning when his dad showed his mom the paper with a headline about the stock market crashing. And saying 'good that'll teach those guys'. Six months later his dads tailor shop went under and his dad never had stable employment after that.
brador 4y ago
There's always the option to release founder equity in exchange for more investment. If the startups were viable before, they're most likely still viable now. Already picked up some great deals and next week is booked dense.
mlyle 4y ago
> Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure Startups are going to get most of their deposits back-- perhaps all if there's an acquisition. If SVB is not acquired, I hope the FDIC is able to get a substantial dividend quickly so that they can keep operating and that everyone works to keep disruption low. But I don't think the federal government needs to make depositors whole beyond the insurance limits. I think that sets its own bad precedent. Maybe some startups are going to lose 5-40% of their cash because of their treasury management choices. That is OK. The times when I was a founder of a startup with a substantial cash balance--- we hedged the bank risk. There was a cost to it. I don't think those costs should be socialized.
- thecus 4y ago
  [flagged]
  - Jtsummers 4y ago
    > You're expecting early stage venture backed companies to have treasury expertise? Time to focus and think about that? You hire a financial manager, in-house or a service. Basic delegation task that any one (individual or business) dealing with more than a million dollars should probably be doing anyways. Certainly anyone dealing with the kind of money we're talking about here with SVB's customers.
  - mlyle 4y ago
    > I simply don't believe you ever founded a startup. CTO Recourse Technologies; acquired by Symantec in 2002. CEO, later VP of Engineering TransLattice; acquired by QualComm 2017. And a couple of other things inbetween. Now I'm a middle school/high school teacher. Your assumption of bad faith is terrible. > A big variable here is simply when and how money market sweep funds will be handled and made available, if you had millions without sweeping into a money market fund, that's silly. You just use IntraFi and they take care of the details for you. Odds are your bank makes the introduction when you ask the question about the exposure. > This is one of the dumbest views Make an argument without calling people dumb. > If the government can protect against huge losses because of their liquidity, why in the world wouldn't we let them? The bonds SVB held are only mark-to-market losses right now because they haven't matured. Duration risk is real risk.
shadowgovt 4y ago
No, but the median salary for a software engineer is still 120k, a little under double the median salary across all industries. It's hard to dredge up deep, deep wells of sympathy for folks who were already playing the salary game at double the value of half the players. One can't escape the sense that if they've done the kind of budgeting that a regular American does, they will be fine.
- wpietri 4y ago
  Especially for the startup end of things, where we are aiming to disrupt other businesses. Should we have a strong safety net, so that people who lose their jobs due to market disruptions or executive mismanagement do not suffer? Absolutely. And if it's currently inadequate, by all means let's improve it. But I think it's wrong to try to protect jobs through government subsidies to industries where execs made bad choices. Which is exactly what a lot of people are apparently asking for when they're asking for depositors to get retroactive free deposit insurance here.
  - shadowgovt 4y ago
    It is possible that it'll make some kind of realpolitik sense to stabilize the startup scene, but I sort of doubt it. During the housing crisis, the federal government bought up sufficient stock to stabilize American auto manufacturing not because they particularly cared about the jobs that would be lost or the ecosystem of supporting industries that would be damaged as a result of loss of major manufacturing, but because auto manufacturing is one of America's national security concerns... The factories and skill sets that create trucks can create APCs, jeeps, and tanks if a hot war breaks out. I'm not exactly sure off the top of my head what the similar defense necessity story is for Silicon Valley.
    - wpietri 4y ago
      Agreed. Especially for the bits of it that are at risk here, which are mainly small, unprofitable players.
    - epvgwwqe 4y ago
sanderjd 4y ago
Just keep in mind that miserable jerks are naturally more inclined to be noisy. This is showing up on both sides of this debate. There's these miserable jerk VCs noisily demanding tax funded bailouts to preserve some of their wealth that is at risk. And there are the miserable jerks you're talking about on the other side who claim to want to see a bunch of peoples' livelihoods put at risk. But those people are just a noisy minority. Most people are quietly somewhere else on the continuum between those extremes.

by reb 4y ago

idopmstuff 4y ago

Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech.

Jtsummers 4y ago
What contagion? How is this going to spread to the rest of the US that isn't actually dependent upon any of these startups or this bank? No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy.
- idopmstuff 4y ago
  SVB was the sixteenth largest bank in the US. When businesses see that their money isn't safe in the sixteenth largest bank, they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. > No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy. That doesn't matter in the slightest. Companies don't do deep evaluations of the financial risks of their banks (as clearly evidenced by what's happening right now). They'll flee from what they perceive as unsafe into what they perceive as safe, regardless of balance sheet realities.
  - Jtsummers 4y ago
    > they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. One of the primary issues being discussed is the insured limits at banks, and the uncertainty on whether depositors can be made "whole" (it's unclear whether people saying that mean 100% or something close to 100%, so I'm putting it in quotes, some people are being really loose with their terms in this thread). Why the fuck would people, given that context, ever move "all of their money" to only the biggest 3 or 4 institutions and increase their risk by consolidating in exactly the same way that caused the current problems? If anything this is a potential boon for the many smaller banks as they can gain additional depositors as people wise up to their risk exposure.
    - akavi 4y ago
      Because if there was a run on JP Morgan, the US government would absolutely "bail out" depositors. Consolidating increases the risk of a bank run, decreases the risk to the individual depositor.
      - Jtsummers 4y ago
        I can see the logic of that, "Let's act irrationally together and force the government to bail us out next time we make a run on our own bank." Or they can act rationally, distribute (manually or through existing methods) their cash across multiple banks so that their risk exposure is lower and they don't have to depend on the government maybe, possibly, bailing them out. You know, the thing they'd have done if they'd hired financial managers in the first place (which obviously they didn't, or they hired incompetent ones).
        throw2311 4y ago
        It's not irrational to act in your own interest. It's irrational to suppose that everyone should act in the majorities interest.
        4y ago
wpietri 4y ago
If you're claiming that startups are so systemically important that they need special protection, then you are also saying that they are so systemically dangerous that they need much more aggressive regulation. Is that really what you want?
- x0x0 4y ago
  That's a very odd way of stating "here's a sector that will be badly hurt if the contents of their checking accounts disappear with an unknown timeline and percentage recovered." By that rubric, you could perfectly well claim that your accountant, laundromat, and lawn care companies are systematically important, because they'd fire their employees if their checking accounts disappeared.
  - wpietri 4y ago
    Sure, so I'm saying those things are not systemically vital such that they should be exempt from the consequences of their market choices. You're the one claiming there will be contagion here. I don't think that's the case. If a bunch of unprofitable companies with bad treasury management go under, I think the rest of the economy will be fine. Companies go out of business every day. If you are claiming that tech is somehow special such that contagion will harm the wider economy, as was the case with mortgage-backed securities in 2008, then any taxpayer-funded bailout should be a one-time deal that goes along with enough regulation so that contagion is no longer a risk in the future.
    - x0x0 4y ago
      > You're the one claiming there will be contagion here. In the sense that I never said that, sure. The only thing I claimed, even implicitly, is firing a bunch of people because their employer's cash disappeared would be bad.
      - wpietri 4y ago
        No, you explicitly used the word contagion: "If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech." That has a technical meaning in finance: https://en.wikipedia.org/wiki/Financial_contagion https://en.wikipedia.org/wiki/Financial_contagion
MrMan 4y ago
that's a lie. and if there is contagion it won't be stemmed by bailing you as a depositor out, we will need that money elsewhere to shore up the system. good luck to you
BeFlatXIII 4y ago
Perhaps we ought to stop paying off the hostage-takers and let things follow their natural course.
Gibbon1 4y ago
People saying that depositors need to be ratfucked reminds me of a guy writing about living through the great depression. First he knew about it was one morning when his dad showed his mom the paper with a headline about the stock market crashing. And saying 'good that'll teach those guys'. Six months later his dads tailor shop went under and his dad never had stable employment after that.

brador 4y ago

There's always the option to release founder equity in exchange for more investment. If the startups were viable before, they're most likely still viable now. Already picked up some great deals and next week is booked dense.

mlyle 4y ago

> Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure Startups are going to get most of their deposits back-- perhaps all if there's an acquisition. If SVB is not acquired, I hope the FDIC is able to get a substantial dividend quickly so that they can keep operating and that everyone works to keep disruption low. But I don't think the federal government needs to make depositors whole beyond the insurance limits. I think that sets its own bad precedent. Maybe some startups are going to lose 5-40% of their cash because of their treasury management choices. That is OK. The times when I was a founder of a startup with a substantial cash balance--- we hedged the bank risk. There was a cost to it. I don't think those costs should be socialized.

thecus 4y ago
[flagged]
- Jtsummers 4y ago
  > You're expecting early stage venture backed companies to have treasury expertise? Time to focus and think about that? You hire a financial manager, in-house or a service. Basic delegation task that any one (individual or business) dealing with more than a million dollars should probably be doing anyways. Certainly anyone dealing with the kind of money we're talking about here with SVB's customers.
- mlyle 4y ago
  > I simply don't believe you ever founded a startup. CTO Recourse Technologies; acquired by Symantec in 2002. CEO, later VP of Engineering TransLattice; acquired by QualComm 2017. And a couple of other things inbetween. Now I'm a middle school/high school teacher. Your assumption of bad faith is terrible. > A big variable here is simply when and how money market sweep funds will be handled and made available, if you had millions without sweeping into a money market fund, that's silly. You just use IntraFi and they take care of the details for you. Odds are your bank makes the introduction when you ask the question about the exposure. > This is one of the dumbest views Make an argument without calling people dumb. > If the government can protect against huge losses because of their liquidity, why in the world wouldn't we let them? The bonds SVB held are only mark-to-market losses right now because they haven't matured. Duration risk is real risk.

shadowgovt 4y ago

No, but the median salary for a software engineer is still 120k, a little under double the median salary across all industries. It's hard to dredge up deep, deep wells of sympathy for folks who were already playing the salary game at double the value of half the players. One can't escape the sense that if they've done the kind of budgeting that a regular American does, they will be fine.

wpietri 4y ago
Especially for the startup end of things, where we are aiming to disrupt other businesses. Should we have a strong safety net, so that people who lose their jobs due to market disruptions or executive mismanagement do not suffer? Absolutely. And if it's currently inadequate, by all means let's improve it. But I think it's wrong to try to protect jobs through government subsidies to industries where execs made bad choices. Which is exactly what a lot of people are apparently asking for when they're asking for depositors to get retroactive free deposit insurance here.
- shadowgovt 4y ago
  It is possible that it'll make some kind of realpolitik sense to stabilize the startup scene, but I sort of doubt it. During the housing crisis, the federal government bought up sufficient stock to stabilize American auto manufacturing not because they particularly cared about the jobs that would be lost or the ecosystem of supporting industries that would be damaged as a result of loss of major manufacturing, but because auto manufacturing is one of America's national security concerns... The factories and skill sets that create trucks can create APCs, jeeps, and tanks if a hot war breaks out. I'm not exactly sure off the top of my head what the similar defense necessity story is for Silicon Valley.
  - wpietri 4y ago
    Agreed. Especially for the bits of it that are at risk here, which are mainly small, unprofitable players.
  - epvgwwqe 4y ago

sanderjd 4y ago

Just keep in mind that miserable jerks are naturally more inclined to be noisy. This is showing up on both sides of this debate. There's these miserable jerk VCs noisily demanding tax funded bailouts to preserve some of their wealth that is at risk. And there are the miserable jerks you're talking about on the other side who claim to want to see a bunch of peoples' livelihoods put at risk. But those people are just a noisy minority. Most people are quietly somewhere else on the continuum between those extremes.