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Another concerning factor is that many large VC firms sent emails to their portfolio companies (hundreds or more at a time) warning them to withdraw funds, trig
by zfell 4y ago
Another concerning factor is that many large VC firms sent emails to their portfolio companies (hundreds or more at a time) warning them to withdraw funds, triggering the run.
An alternative could have been for this group of already closely connected individuals to call an emergency meeting and agreeing to send the opposite message to their portfolio companies to avoid the crisis. Given SVBs issue was really about profitability and not solvency without the bank run.
I'm skeptical a real lesson will be learned here, and we lose the opportunity to build scar tissue. Instead, we wake up from a nightmare, brush it off, and move on.
- throw123123123 4y agoIf a VC firm tells you to keep your funds in a bank that gets a run, and you lose access to it, that VC firm destroys its reputation forever. Please think about the payoff matrix and the fiduciary responsibility of the actors.
- zfell 4y agoNews of which funds sent emails asking their portcos to withdraw funds from the bank that has supported this industry for 40 years is a reputation hit in my view. Although it may certainly not be a popular opinion.
- standapart 4y agoThis is a significant simplification of the matter. I doubt it works in reality. Replace the words "VC firm" with "Sequoia" in the previous statement and see if it rings true that Sequoia's reputation would be destroyed forever.
- throw123123123 4y agoWould take a massive hit for sure.
- srcreigh 4y agoIt’s kinda like prisoners dilemma, except the prisoners can meet and discuss a cooperative strategy.
- zfell 4y agonice analogy ^_^