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> Having your bank account randomly disappear isn't one of the risks that anyone should have to take. But that is the risk founders chose when they put their m
by threeseed 4y ago
> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.
But that is the risk founders chose when they put their money in (a) any bank and (b) specifically SVB.
Your money is only insured to $250k. SVB had no CRO, lobbied against regulation, made no efforts to comply with Basel 3 and was engaging in risky bets that many had previously warned about.
CEOs have a fudiciary responsibility to understand and mitigate risks. And expecting taxpayers to bail you out (either directly or indirectly) when your incompetence causes harm is simply not fair.
- moose_is_loose 4y agoDon't forget the benefits they got from white glove treatment and easy access to loans. This wasn't a one way street, there was a reason they deposited the money there.
- scatters 4y agoWhat loans? SVB's problem was that its customers didn't need loans, since they had VC money and just needed somewhere to put it.
- brigadier132 4y ago> CEOs have a fudiciary responsibility to understand and mitigate risks This is an impossible standard to hold founders of 10-100 person startups to. Might as well say "CEOs should be omniscient"
- swatcoder 4y agoOr perhaps “CEOs should hire a CFO” Founders are often coming into new levels of financial responsibility when they get funded and as their business draws in later rounds of investment and customer revenue. You can’t assume $4M works the same way as $40k or your liable to lose a big chunk of it. Thankfully, there are professionals whose role is to help with that.
- ohdannyboy 4y agoOr the VC companies that lent the money would pool resources and have one person handle a few smaller businesses using similar procedures to mitigate risk. Helping manage growth is part of what these companies are supposed to do and you'd think it would protect the investment (in a world where you thought the limit was actually $250k). Oddly though, a thing I've heard repeated over and over is "it was in our covenant to use only SVC."
- justinclift 4y agoThe CEO of a 10 person startup I could understand not being on the ball with this. But not the CEO of a 100 person startup. 100 people is large enough to have a substantial amount of human time available for use, and likely budget as well.
- brigadier132 4y agoYou think the CEO of a 100 person startup should be worried about something like a bank run happening? It's not the 1920s. Most people don't ever consider that money in their bank could disappear for no reason. Next you should tell me they should worry about "the big one" hitting Silicon Valley which we know the actual odds for and people still seem to live there.
- swatcoder 4y ago> Most people don't ever consider that money in their bank could disappear for no reason. Geez. Let’s hope you’re wrong. Financial illiteracy is bad news in a society built on markets. I can’t speak for “most people” and especially not people in Gen Z, but otherwise, as a matter of fact, many people do think about that and manage their money accordingly.
- brigadier132 4y agoBull shit, 99% of people that use the banking system do not worry about bank runs.
- justinclift 4y agoDo 99% of people have more than the $250k in their account? Of those who do, I wonder what percentage would be worried about that risk? Maybe more than 50%? 75%? 80%?
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- throwaway81523 4y agoIf you want your investments to be guaranteed by the US governent, that product exists (US Treasury bonds) and it is popular. The yields are pretty low though. People with megabucks to invest who put it in something other than treasuries do that because they chose to accept higher risks in order to chase higher returns. Except surprise, now the risk is socialized. No, people with deposits in SVB never faced having it all disappear. SVB was insolvent which meant that its liabilities were larger than its assets. That doesn't mean the assets were worthless. The FDIC process is like a bankruptcy. First, everyone gets restored up to the $250K insurance limit. Next, the remaining assets are sold off and the proceeds are divvied up among the uninsured depositors. So the depositors take a haircut: some fraction goes poof and they get back the rest. They don't end up empty handed. Figures like 90% (i.e. they lose 10%) were being thrown around this morning, before the bailout.
- brigadier132 4y ago[flagged]
- kreeben 4y agoCEO's should read the god damn bank agreement. WTF.
- brigadier132 4y agoHow does "reading the bank agreement" improve anything? Every bank has the same exact risk.
- theRealMe 4y agoSo many people in all these threads that are doing the Monday morning quarterback of startup founders and believing that they would have done things differently if only THEY had been the CEO.
- hcks 4y agoObviously the #1 top priority of the CEO of an early stage startup is to spend time assessing and countering risks such as bank runs, gross mismanagement at their bank, earthquakes
- iancmceachern 4y agoThis is reducto ad absurdum. The kind of risk management that would have saved startups here is basic, elementary business. Parking money at treasurydirect, firms that handle this kind of thing as a service.
- threeseed 4y agoThat is the standard as defined by law and to which all directors sign up to. If you can't live up to that responsibility don't run a company.
- shrimpx 4y agoYou don't have to be anywhere close to "omniscient" to understand the concepts of risk and insurance. Every layman knows about FDIC limits. In addition, these CEOs are backed and advised by resourceful VCs. Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash. Hubris or incompetence or both.
- klabb3 4y ago> Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash. Worse, according to others in the thread they had it in the contract that they must use SVB exclusively.
- zx8080 4y agoIf this leads to bailout then does it mean that taxpayers are effectively responsible for the CEOs decisions? If they are not, then it's 250k left from every account and all else is lost. And someone could be sued for that. Who should it be if not CEOs?
- Tempest1981 4y agoThe $250k coverage (per depositor) is also funded by taxpayers, right?
- greenyoda 4y agoNo, the FDIC is an insurance pool funded by its member banks.
- tomato_123 4y agoIt's an impossible standard to hold founders to know that deposits are insured up to $250,000? This isn't exactly fine print. Just be minimally competent and not a clown.
- threatofrain 4y agoWhat were the risky bets?
- nkozyra 4y agoThis is a very weird blame shift. At 250k/account insured suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks?
- tome 4y agoOr just put into T-Bills, which private individuals can do from their phones.
- sseagull 4y agoOr pay someone/some company to do it. You pay for AWS because you don’t feel like managing hardware, why just assume you can manage 10s of millions of dollars?
- brigadier132 4y agoExcept people that owned T-Bills that they bought through SVB also lost access to their money. Should they buy the T-Bills and hold the actual certificates under their mattress?
- tome 4y ago> Except people that owned T-Bills that they bought through SVB also lost access to their money. I don't think that's the case, though I may be wrong and would appreciate correction if so. Anyone who held T-Bills at SVB as a broker should have been able to transfer them to another broker at no loss (but at a small delay), and the remaining $250k in their checking account should have been available within one business day.
- threeseed 4y agoNo whether you have $1 in the bank or $100 million is irrelevant. Your job is to understand and mitigate financial risk as is required by law. And in this case there are many options for managing this risk other than splitting it up manually into multiple bank accounts. Speaking with a financial advisor would help with this.