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Wow. What was the putative reason for this clause? It's interesting that a VC would have such a strong incentive to pressure portfolio companies to keep their m

Wow. What was the putative reason for this clause? It's interesting that a VC would have such a strong incentive to pressure portfolio companies to keep their money at one specific bank.

luckylion 4y ago
Invested in the bank? Got a sweet personal deal with the bank in return for pinning their investments to the bank? It certainly sounds like they had some side-things going on, otherwise hard to believe they'd not just recommend fiscally unsound practices to their portfolio companies, but even require them to.
- gnicholas 4y ago
  If practices like these are widespread, it could explain why some VCs are pushing hard for a government backstop. It would be embarrassing to them if these clauses came to light, and they could arguably be on the hook for damages in lawsuits by shareholders of their portfolio companies.
  - BadCookie 4y ago
    It also seems possible that some VCs have their personal funds tied up in SVB.
    - adastra22 4y ago
      A LOT of them do. And late-stage founders as well. You know how people like Elon cash out their shares via collateralized loans? What bank do you think processes those loans? And SVB really didn't like to be transactional--they work hard to make sure your SVB collateralized loan is linked to a SVB checking account and a SVB founder-shares-backed mortgage for your 5,000 sqft mansion in Los Altos Hills.
adastra22 4y ago
It's indirect and, I think, unintentional on the VC's part. The VC required closing via wire to a SVB account, and that a SVB deposit account be maintained to assist in further financing rounds, bridge loans, and other things. Separately, SVB required an exclusive depositing relationship when signing up with them for commercial bank services. It's the SVB side of this that I have issue with, really. No fault of the VC that they wanted a shared banking relationship, but that bank should not have been allowed to prohibit us from using other banks for deposit services. TL;DR: If we went with that VC for the Series A, they wanted us to be a SVB customer, and SVB demanded exclusivity.
- gnicholas 4y ago
  Wow, that's incredible. I can't imagine signing up with a bank that demanded exclusivity. I know some banks give better rates if you have a broader relationship, but I've never heard of one that insisted on exclusivity across the board.
  - adastra22 4y ago
    I've never heard of another example like this.

Wow. What was the putative reason for this clause? It's interesting that a VC would have such a strong incentive to pressure portfolio companies to keep their money at one specific bank.

luckylion 4y ago

Invested in the bank? Got a sweet personal deal with the bank in return for pinning their investments to the bank? It certainly sounds like they had some side-things going on, otherwise hard to believe they'd not just recommend fiscally unsound practices to their portfolio companies, but even require them to.

gnicholas 4y ago
If practices like these are widespread, it could explain why some VCs are pushing hard for a government backstop. It would be embarrassing to them if these clauses came to light, and they could arguably be on the hook for damages in lawsuits by shareholders of their portfolio companies.
- BadCookie 4y ago
  It also seems possible that some VCs have their personal funds tied up in SVB.
  - adastra22 4y ago
    A LOT of them do. And late-stage founders as well. You know how people like Elon cash out their shares via collateralized loans? What bank do you think processes those loans? And SVB really didn't like to be transactional--they work hard to make sure your SVB collateralized loan is linked to a SVB checking account and a SVB founder-shares-backed mortgage for your 5,000 sqft mansion in Los Altos Hills.

adastra22 4y ago

It's indirect and, I think, unintentional on the VC's part. The VC required closing via wire to a SVB account, and that a SVB deposit account be maintained to assist in further financing rounds, bridge loans, and other things. Separately, SVB required an exclusive depositing relationship when signing up with them for commercial bank services. It's the SVB side of this that I have issue with, really. No fault of the VC that they wanted a shared banking relationship, but that bank should not have been allowed to prohibit us from using other banks for deposit services. TL;DR: If we went with that VC for the Series A, they wanted us to be a SVB customer, and SVB demanded exclusivity.

gnicholas 4y ago
Wow, that's incredible. I can't imagine signing up with a bank that demanded exclusivity. I know some banks give better rates if you have a broader relationship, but I've never heard of one that insisted on exclusivity across the board.
- adastra22 4y ago
  I've never heard of another example like this.