10 ms·

The Tantrum Venture Capitalists Threw over Silicon Valley Bank

117 points by robgibbons 4y ago

MilnerRoute 4y ago
"VCs required portfolio companies to bank with SVB."
- rvz 4y ago
  “VCs requiring portfolio companies to join in their pyramid scheme.”
bahmboo 4y ago
It's hard to follow this story and not see how corrupt and hypocritical the top tier VCs are. Unfortunately it doesn't seem like using inside info to precipitate a bank run is illegal. "No handouts, unless they are for me."
- _skel 4y ago
  Why do people think VCs are libertarians? Most of them are Democrats! So are most major tech CEOs. Political contributions are publicly recorded if you want to see where any individual stands… And when did VCs rail against “bailouts” in the past? There is a pretty big difference between being a mainstream capitalist and being a libertarian.
  - zeruch 4y ago
    "Why do people think VCs are libertarians? Most of them are Democrats!" You seem to: 1. presume those two categories are mutually exclusive. They aren't. 2. Many of the libertarian values on the economic side, held by many in the VC/PE space regardless of political affiliation, means that just like Rand herself, they espouse -by action if not by word- "privatize gain, socialize risk" pretty much by rote. Anyone shocked by this either isn't looking, hasn't been in this business very long, or is the person mentioned in the Steinbeck quote (paraphrased here for contextual re-appropriation) "the rubes see themselves not as an exploited set of growth-hackers and disruption-monkeys, but as temporarily embarrassed billionaires."
  - rexreed 4y ago
    Let me acquaint you with Peter Thiel, a libertarian VC: https://www.wired.com/story/the-libertarian-logic-of-peter-thiel/ https://www.wired.com/story/the-libertarian-logic-of-peter-t... And lest you think he's the only libertarian VC: https://www.newstatesman.com/quickfire/2023/03/silicon-valley-bank-collapse-hypocrisy-libertarian-tech-bros https://www.newstatesman.com/quickfire/2023/03/silicon-valle... And to them railing against bailouts while asking for them now (from the above article): “Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks – the same David Sacks who is a friend of Thiel and Musk, and who has previously heavily criticised “special-interest corruption” and bank bailouts. Bill Ackman, a billionaire hedge fund manager and Donald Trump supporter that has in the past complained about attempts by the government’s Securities and Exchange Commission to regulate one of his investment funds, performed some spectacular mental gymnastics over the weekend, calling on the FDIC to “guarantee all bank deposits”.
    - pc86 4y ago
      I don't know that I would describe any of Thiel's opinions as "mainstream."
      - deleted 4y ago
        [deleted]
      - JetSpiegel 4y ago
        He was practically the GOP economic ideologue under Trump.
- listenallyall 4y ago
  I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical. Equity bailouts, TARP relief funds, debt guarantees... those are entirely different stories. I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
  - LiquidSky 4y ago
    >I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical. Of course we all want that, the issue is that there are long-established, clearly-defined rules for how much of your account is protected that somehow don’t apply to the rich. For you or I it’s $250,000. Need more to be whole? Too bad, suck it up, that’s the law. But VC accounts? 100% recovery sir, sorry for the trouble! >I also don't blame them for whining and complaining, likely anyone would do the same. Except until last week most of these guys were crowing about PERSONAL RESPONSIBILITY and living with your choices and how handouts and bailouts were evil in response to workers and consumers asking for anything Curiously though, when it became about their money, suddenly it’s GOVERNMENT HELP
    - initplus 4y ago
      People are getting too caught up in the 250k limit. Most bank failures result in all depositors being made whole - even over the limit. Normally by regulators “hinting” that a larger bank should acquire the failing banks assets whole. FDIC exists to create faith in the banking system - no to just enforce a rule book on how deposit insurance is structured. The goal is for FDIC to never have to pay out in the first place - FDIC’s existence prevents the bank run from starting. The obvious conclusion to the 250k limit (splitting deposits between banks) doesn’t really do anything to actually reduce risk in the banking system, or risk to FDIC. Splitting deposits like this is artificial behaviour that doesn’t have any real benefits to overall stability of the economy.
- guywithahat 4y ago
  What makes you say they’re corrupt? The only accusation I’ve seen is that Thiel removed his money after the bank stopped processing his transactions, but that doesn’t seem nefarious to me
  - manicdee 4y ago
    The obvious chain of events is payments not being processed, Thiel gets on the blower, receives inside information which causes him concern, removes his money while he still can. To me as a low information armchair expert it seems bizarre that Thiel could move money out while SVB was having trouble moving money at all.
- aaronbrethorst 4y ago
  Privatize the profits! Socialize the losses!
  - twblalock 4y ago
    The profits from tech are available to investors via the stock market. Meanwhile, no taxpayer money is being used to clean up the failure of SVB and prevent the contagion from spreading.
    - deleted 4y ago
      [deleted]
    - dsm4ck 4y ago
      where is the money coming from if not taxpayers?
      - twblalock 4y ago
        The FDIC does not get a penny of taxpayer money. Member banks pay for it. Member banks also pay for the Fed.
        brightlancer 4y ago
        Member banks pay for it _by law_. And those member banks get that money either by charging customers for it or by reducing what they provide in returns on investment. It may not be coming from income taxes, but it's definitely socializing the losses and I would argue it's effectively coming from the taxpayers.
meltyness 4y ago
Shame is the word.
rftyuikdjhgvcf 4y ago
> To put it more plainly, for the past 10 years venture capitalists have had near-perfect laboratory conditions to create a lot of money and make the world a much better place. And yet, some of their proudest accomplishments that have attracted some of the most eye-watering sums have been: 1) chasing the dream of zeroing out labor costs while monopolizing a sector to charge the highest price possible (A.I. and the gig economy); 2) creating infrastructure for speculating on digital assets that will be used to commodify more and more of our daily lives (cryptocurrency and the metaverse); and 3) militarizing public space, or helping bolster police and military operations.
- Apocryphon 4y ago
  Another summary from the author: > Ruined housing market & transit systems, wagged war on labor law, accelerated the militarization of public space & the border, and intensified gambling. https://twitter.com/bigblackjacobin/status/1635304210421149696 https://twitter.com/bigblackjacobin/status/16353042104211496...
  - twblalock 4y ago
    As if it’s the responsibility of VCs to provide housing and transit? That’s ridiculous.
    - Apocryphon 4y ago
      VCs funded businesses that exacerbated problems in those sectors. So this is more of a critique that VCs caused problems, not chiding them for not providing solutions. But sure, corporate social responsibility is a concept that has long predated the current ESG trend. We once had a society that at least paid lip service to noblesse oblige.
      - brightlancer 4y ago
        A problem is that when a rich individual or a for-profit corporation donates money or otherwise engages in charity, there's a very loud contingent of writers who will respond that the individual or corporation should've never been able to accumulate such money, that charity is a scam to protect the rich, and what we should do is raise taxes on everyone to provide these things for everyone via government. It's important to understand that noblesse oblige was transactional: it staved off the masses from revolting and even generated some good. When charity puts a target on your back, folks won't engage in charity.
chaostheory 4y ago
Why are we complaining about the VCs when this isn’t their fault? If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. The exuberance and recklessness of the 90s is now haunting us, just like with Reagan’s deficit spending. This not being mentioned in over a dozen articles points to the failure of the mainstream media yet again, and they wonder why no one trusts them anymore. Dodd Frank obviously is not good enough. If I were to guess, it was drastically weakened by lobbyists.
- johnny22 4y ago
  people are just pointing out what they see as hypocrisy, that's it. I don't follow these people on twitter so I have no idea if that's the case or not.
  - chaostheory 4y ago
    Hypocrisy? Banks have already proven their recklessness time and time again. Glass Steagall was enacted to prevent yet another Great Depression. Unless all the VCs are fintech bros, I don’t see anything hypocritical. The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.
- dia80 4y ago
  As I understand it SVB is insolvent primarily due to incompetence, the actual actions they have taken: take deposits and buying US treasury bonds are every day activities for a bank. There are no exotic derivatives or off balance sheet special purpose vehicles. It's hard to regulate that away.
  - chaostheory 4y ago
    You can regulate the minimum reserves banks have.
    - twblalock 4y ago
braingenious 4y ago
The funniest thing about this weekend was watching Jason Calacanis descend into what appears to be some sort of religious paroxysm, speaking in tongues, screaming at the sky about the ruinous portends he read in his tea leaves, gnashing his teeth and rending his garments. Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.
- twblalock 4y ago
  > Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces. Without the government's actions over the weekend, bank runs probably would have happened, and they still might.
  - processeseses 4y ago
    Yes and it's in the fed's playbook to secure as much of the deposits as they can as quick as they can. This is exactly what they did and that's something that can take a few days. None of these tweets did anything to change that.
    - twblalock 4y ago
      This is not part of the normal playbook. If it was, it would not involve special announcements and a speech by the President. The normal playbook for this happens multiple times per year at small regional banks and it barely registers on the news. This is special. The government did what the VCs recommended. Maybe not because of the tweets, but it still happened because what the VCs recommended was actually the right thing for the government to be doing! The systemic risk identified by the VCs is real!
      - Apocryphon 4y ago
        Why are you attributing this action to VCs grandstanding on social media, rather than, you know, government regulators and private analysts doing their job? That's just being distracted by the dog and pony show.
rvz 4y ago
Obviously the VC pyramid scheme created by the ‘tech bros’ and the VCs like YC, Lightspeed, and the rest of them had to crash hard in 2022 and now with the interest rate hikes decimating the chronically unprofitable startups that are still trying to raise money and SVB was the straw that destroyed it all. Quite a hilarious ending to see the panic and the collapse of the complete pyramid scheme. We are not even done yet since there will be more market moving news this week to completely vaporize them into pieces.
breck 4y ago
There were 2 groups this weekend. The first group whined hysterically, like JasonC, GarryT (and YCombinator). Not only whined, but showed a strong lack of moral character (asking the public to bail out their private 1% bank accounts). The other group built (like Mercury Bank) and innovated to reduce future situations like this. Kudos to the second group. Shame on the first group. It's sad their whining got rewarded. Disclosures: I am an investor in a number of startups that had >$250K in uninsured deposits SVB, but I was still against the bailout b/c I think it just made America weaker in the long run. A 10% haircut would have been fine. I am also a tiny tiny investor in Mercury.
_skel 4y ago
VCs are a convenient scapegoat but if you look at what actually happened, this is the fault of bankers and bank regulators. Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s, and didn't have any regulatory red flags? Are we supposed to blame VCs for not knowing about the bank's investment problems when the regulators who were supposed to know about them didn't know either? Should we blame founders for taking banking advice from their funders and boards of directors? Are we supposed to forget that the era of easy money the article dislikes was created by the Fed, and that the duration risk on long-term securities that doomed SVB was also realized because of the Fed's reaction to its previous mistakes? We should blame everyone, including the government, for this mess. When people like the author single out VCs and rant about AI being a boondoggle it's clear they just don't like or understand tech. Tech has been the space program of our generation. We now carry devices in our pockets that put more information at our fingertips than entire civilizations could access throughout all of human history. Mobile payments have enabled entrepreneurial capitalism in impoverished parts of the world. Anywhere we are, we can get a map of our location and directions to anywhere we want to go. The scale and technology that makes remote work even possible for much of the population didn’t even exist a decade ago. Some pieces existed but they never would have scaled the way we needed them to. If you didn’t lose your job during the pandemic, you ought to be grateful to the major cloud providers for the fact that your video conferencing software was able to function while you and almost everyone else were piling onto it. You should also be grateful there were multiple delivery companies able to bring you groceries and restaurant food when you weren’t allowed to leave the house. I know restaurants are grateful for the delivery services — so many more would have gone out of business if in-person transactions were the only way to sell their product! Anyone who owned a total market index fund in the past decade has benefitted massively from the success of big tech, including most pension funds, university endowments, and many individuals. The creation of wealth has been enormous in scale and enormously socially beneficial. VCs made all those good things possible and if we also get dog-walking services and NFTs of monkeys that's a small price to pay.
- breck 4y ago
  > Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s YES! The $250K limit was literally in 100pt font (https://twitter.com/breckyunits/status/1635356025175027712 https://twitter.com/breckyunits/status/1635356025175027712). Amounts above that were at risk! Instead the government just ignored that, on a whim. This wasn't even in the fine print! Can you explain to me now what rules I can and cannot pay attention to? I can't.
AlbertCory 4y ago
No sympathy for the VC's or SVB, but they had me up until: >a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :) Letting people face the consequences of their venality? Now we're getting warmer.
- samcal 4y ago
  I don't know if you should knock government investment in technological development, seems to have worked pretty well for COVID vaccines, space shuttle for the Moon, and brutally convenient murder machines
  - AlbertCory 4y ago
    Right. Like https://en.wikipedia.org/wiki/Solyndra https://en.wikipedia.org/wiki/Solyndra or https://www.technologyreview.com/2011/07/25/192832/lessons-from-sematech/ https://www.technologyreview.com/2011/07/25/192832/lessons-f... I don't know what "space shuttle for the Moon" means. Can you explain?
- yamtaddle 4y ago
  > So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :) These actually have a pretty great track record of, specifically, setting the direction of technological development. Often in a way that's more of a "here's what we want; now, private industry, go do it and we'll offer you X in return" rather than specifying the minutia, to be clear, but it's absolutely not a crazy notion. And I don't just mean NASA or the US MIC (DARPA, notably), but things like postwar Japan's heavily-government-directed R&D efforts and research-pooling initiatives, or Germany's skating-where-the-puck's-headed moves on renewable energy R&D and manufacturing back in (IIRC) the late 90s and early 00s. That we ought to rely on public efforts to direct technological development, at least to some significant degree, isn't obviously a bad idea.
  - 4y ago
jdminhbg 4y ago
Tweet from the author [0]: > My debut at @Slate: Venture capitalists are parasites who couldn't be trusted with the financial institution that held up their industry, let alone the direction of our technological development. Euthanizing them is imperative if we want a better world. I probably wouldn't tweet out language about "euthanizing" "parasites" but maybe I just have a better grasp of history than the author. There are good critiques of everyone involved in this elsewhere, I have no idea how a reasonable person could conclude this is the one that should be posted and shared. [0]: https://twitter.com/bigblackjacobin/status/1635302872291381248 https://twitter.com/bigblackjacobin/status/16353028722913812...
- brightlancer 4y ago
  Maybe the author knows some history and just presumes he'll always be on the side flipping the switch. That kind of anger and _hate_ has become much more acceptable. Reasonable? No. Mainstream? Yes.
karaterobot 4y ago
> Remind me why, exactly, these guys have so much control over technological innovation? Oh, it's be because tech companies need money to operate, and when they ask people for some of their money, the people who give them the money demand input over how that money is used. Hope that answers your question.
cs702 4y ago
What is this drivel doing on the front page of HN? It's one thing to criticize venture capitalists for promoting libertarian ideologies on one hand, and then instantly turning around and asking the federal government to bail out their portfolio companies' bank accounts on the other hand. It's OK to make fun of them too. To paraphrase the late J. K. Galbraith, in the US we see socialism in action mainly when private jets start descending on Reagan national airport, their passengers seeking federal handouts. But the OP crosses the line into silly territory and keeps going past the line, with nonsensical statements such as "[the troubles at SVB] are emblematic of a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development." Left in charge? Of our technological development? That's not even wrong.
spprashant 4y ago
What ended up happening was right, and I am glad things are looking up now. The depositors had to be made whole and Fed in my opinion did the right thing in the end given the choices. But I have never seen the VC community so vocally begging for instant government intervention for anything else in my life. These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts. But when there was a fire in their backyard, they did not "innovate", "disrupt", or "take initiative". They hounded the government like entitled brats, to fix the mess which was in no small part their own doing.
- twblalock 4y ago
  > These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts. That's often the truth. The government does a lot of bad things, and a lot of regulations are bad. When someone complains about the government it doesn't mean they also oppose the good things the government does, and it doesn't mean they oppose the concept of government. Most VCs and major tech CEOs are Democrats. Look at their political contributions.
  - spprashant 4y ago
    You do not set up shop in blue California districts, and not donate to Democrats. I do not think this necessarily correlates to the community actually being left wing. They actively lobby for reduced taxes, deregulation, and reduced worker rights. When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida.
    - twblalock 4y ago
      > When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida. No, there were a few loud ones. Most of them stayed.
      - 4y ago

117 points by robgibbons 4y ago

MilnerRoute 4y ago

"VCs required portfolio companies to bank with SVB."

rvz 4y ago
“VCs requiring portfolio companies to join in their pyramid scheme.”

bahmboo 4y ago

It's hard to follow this story and not see how corrupt and hypocritical the top tier VCs are. Unfortunately it doesn't seem like using inside info to precipitate a bank run is illegal. "No handouts, unless they are for me."

_skel 4y ago
Why do people think VCs are libertarians? Most of them are Democrats! So are most major tech CEOs. Political contributions are publicly recorded if you want to see where any individual stands… And when did VCs rail against “bailouts” in the past? There is a pretty big difference between being a mainstream capitalist and being a libertarian.
- zeruch 4y ago
  "Why do people think VCs are libertarians? Most of them are Democrats!" You seem to: 1. presume those two categories are mutually exclusive. They aren't. 2. Many of the libertarian values on the economic side, held by many in the VC/PE space regardless of political affiliation, means that just like Rand herself, they espouse -by action if not by word- "privatize gain, socialize risk" pretty much by rote. Anyone shocked by this either isn't looking, hasn't been in this business very long, or is the person mentioned in the Steinbeck quote (paraphrased here for contextual re-appropriation) "the rubes see themselves not as an exploited set of growth-hackers and disruption-monkeys, but as temporarily embarrassed billionaires."
- rexreed 4y ago
  Let me acquaint you with Peter Thiel, a libertarian VC: https://www.wired.com/story/the-libertarian-logic-of-peter-thiel/ https://www.wired.com/story/the-libertarian-logic-of-peter-t... And lest you think he's the only libertarian VC: https://www.newstatesman.com/quickfire/2023/03/silicon-valley-bank-collapse-hypocrisy-libertarian-tech-bros https://www.newstatesman.com/quickfire/2023/03/silicon-valle... And to them railing against bailouts while asking for them now (from the above article): “Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks – the same David Sacks who is a friend of Thiel and Musk, and who has previously heavily criticised “special-interest corruption” and bank bailouts. Bill Ackman, a billionaire hedge fund manager and Donald Trump supporter that has in the past complained about attempts by the government’s Securities and Exchange Commission to regulate one of his investment funds, performed some spectacular mental gymnastics over the weekend, calling on the FDIC to “guarantee all bank deposits”.
  - pc86 4y ago
    I don't know that I would describe any of Thiel's opinions as "mainstream."
    - deleted 4y ago
      [deleted]
    - JetSpiegel 4y ago
      He was practically the GOP economic ideologue under Trump.
listenallyall 4y ago
I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical. Equity bailouts, TARP relief funds, debt guarantees... those are entirely different stories. I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
- LiquidSky 4y ago
  >I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical. Of course we all want that, the issue is that there are long-established, clearly-defined rules for how much of your account is protected that somehow don’t apply to the rich. For you or I it’s $250,000. Need more to be whole? Too bad, suck it up, that’s the law. But VC accounts? 100% recovery sir, sorry for the trouble! >I also don't blame them for whining and complaining, likely anyone would do the same. Except until last week most of these guys were crowing about PERSONAL RESPONSIBILITY and living with your choices and how handouts and bailouts were evil in response to workers and consumers asking for anything Curiously though, when it became about their money, suddenly it’s GOVERNMENT HELP
  - initplus 4y ago
    People are getting too caught up in the 250k limit. Most bank failures result in all depositors being made whole - even over the limit. Normally by regulators “hinting” that a larger bank should acquire the failing banks assets whole. FDIC exists to create faith in the banking system - no to just enforce a rule book on how deposit insurance is structured. The goal is for FDIC to never have to pay out in the first place - FDIC’s existence prevents the bank run from starting. The obvious conclusion to the 250k limit (splitting deposits between banks) doesn’t really do anything to actually reduce risk in the banking system, or risk to FDIC. Splitting deposits like this is artificial behaviour that doesn’t have any real benefits to overall stability of the economy.
guywithahat 4y ago
What makes you say they’re corrupt? The only accusation I’ve seen is that Thiel removed his money after the bank stopped processing his transactions, but that doesn’t seem nefarious to me
- manicdee 4y ago
  The obvious chain of events is payments not being processed, Thiel gets on the blower, receives inside information which causes him concern, removes his money while he still can. To me as a low information armchair expert it seems bizarre that Thiel could move money out while SVB was having trouble moving money at all.
aaronbrethorst 4y ago
Privatize the profits! Socialize the losses!
- twblalock 4y ago
  The profits from tech are available to investors via the stock market. Meanwhile, no taxpayer money is being used to clean up the failure of SVB and prevent the contagion from spreading.
  - deleted 4y ago
    [deleted]
  - dsm4ck 4y ago
    where is the money coming from if not taxpayers?
    - twblalock 4y ago
      The FDIC does not get a penny of taxpayer money. Member banks pay for it. Member banks also pay for the Fed.
      - brightlancer 4y ago
        Member banks pay for it _by law_. And those member banks get that money either by charging customers for it or by reducing what they provide in returns on investment. It may not be coming from income taxes, but it's definitely socializing the losses and I would argue it's effectively coming from the taxpayers.

meltyness 4y ago

Shame is the word.

rftyuikdjhgvcf 4y ago

> To put it more plainly, for the past 10 years venture capitalists have had near-perfect laboratory conditions to create a lot of money and make the world a much better place. And yet, some of their proudest accomplishments that have attracted some of the most eye-watering sums have been: 1) chasing the dream of zeroing out labor costs while monopolizing a sector to charge the highest price possible (A.I. and the gig economy); 2) creating infrastructure for speculating on digital assets that will be used to commodify more and more of our daily lives (cryptocurrency and the metaverse); and 3) militarizing public space, or helping bolster police and military operations.

Apocryphon 4y ago
Another summary from the author: > Ruined housing market & transit systems, wagged war on labor law, accelerated the militarization of public space & the border, and intensified gambling. https://twitter.com/bigblackjacobin/status/1635304210421149696 https://twitter.com/bigblackjacobin/status/16353042104211496...
- twblalock 4y ago
  As if it’s the responsibility of VCs to provide housing and transit? That’s ridiculous.
  - Apocryphon 4y ago
    VCs funded businesses that exacerbated problems in those sectors. So this is more of a critique that VCs caused problems, not chiding them for not providing solutions. But sure, corporate social responsibility is a concept that has long predated the current ESG trend. We once had a society that at least paid lip service to noblesse oblige.
    - brightlancer 4y ago
      A problem is that when a rich individual or a for-profit corporation donates money or otherwise engages in charity, there's a very loud contingent of writers who will respond that the individual or corporation should've never been able to accumulate such money, that charity is a scam to protect the rich, and what we should do is raise taxes on everyone to provide these things for everyone via government. It's important to understand that noblesse oblige was transactional: it staved off the masses from revolting and even generated some good. When charity puts a target on your back, folks won't engage in charity.

chaostheory 4y ago

Why are we complaining about the VCs when this isn’t their fault? If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. The exuberance and recklessness of the 90s is now haunting us, just like with Reagan’s deficit spending. This not being mentioned in over a dozen articles points to the failure of the mainstream media yet again, and they wonder why no one trusts them anymore. Dodd Frank obviously is not good enough. If I were to guess, it was drastically weakened by lobbyists.

johnny22 4y ago
people are just pointing out what they see as hypocrisy, that's it. I don't follow these people on twitter so I have no idea if that's the case or not.
- chaostheory 4y ago
  Hypocrisy? Banks have already proven their recklessness time and time again. Glass Steagall was enacted to prevent yet another Great Depression. Unless all the VCs are fintech bros, I don’t see anything hypocritical. The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.
dia80 4y ago
As I understand it SVB is insolvent primarily due to incompetence, the actual actions they have taken: take deposits and buying US treasury bonds are every day activities for a bank. There are no exotic derivatives or off balance sheet special purpose vehicles. It's hard to regulate that away.
- chaostheory 4y ago
  You can regulate the minimum reserves banks have.
  - twblalock 4y ago

braingenious 4y ago

The funniest thing about this weekend was watching Jason Calacanis descend into what appears to be some sort of religious paroxysm, speaking in tongues, screaming at the sky about the ruinous portends he read in his tea leaves, gnashing his teeth and rending his garments. Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.

twblalock 4y ago
> Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces. Without the government's actions over the weekend, bank runs probably would have happened, and they still might.
- processeseses 4y ago
  Yes and it's in the fed's playbook to secure as much of the deposits as they can as quick as they can. This is exactly what they did and that's something that can take a few days. None of these tweets did anything to change that.
  - twblalock 4y ago
    This is not part of the normal playbook. If it was, it would not involve special announcements and a speech by the President. The normal playbook for this happens multiple times per year at small regional banks and it barely registers on the news. This is special. The government did what the VCs recommended. Maybe not because of the tweets, but it still happened because what the VCs recommended was actually the right thing for the government to be doing! The systemic risk identified by the VCs is real!
    - Apocryphon 4y ago
      Why are you attributing this action to VCs grandstanding on social media, rather than, you know, government regulators and private analysts doing their job? That's just being distracted by the dog and pony show.

rvz 4y ago

Obviously the VC pyramid scheme created by the ‘tech bros’ and the VCs like YC, Lightspeed, and the rest of them had to crash hard in 2022 and now with the interest rate hikes decimating the chronically unprofitable startups that are still trying to raise money and SVB was the straw that destroyed it all. Quite a hilarious ending to see the panic and the collapse of the complete pyramid scheme. We are not even done yet since there will be more market moving news this week to completely vaporize them into pieces.

breck 4y ago

There were 2 groups this weekend. The first group whined hysterically, like JasonC, GarryT (and YCombinator). Not only whined, but showed a strong lack of moral character (asking the public to bail out their private 1% bank accounts). The other group built (like Mercury Bank) and innovated to reduce future situations like this. Kudos to the second group. Shame on the first group. It's sad their whining got rewarded. Disclosures: I am an investor in a number of startups that had >$250K in uninsured deposits SVB, but I was still against the bailout b/c I think it just made America weaker in the long run. A 10% haircut would have been fine. I am also a tiny tiny investor in Mercury.

_skel 4y ago

VCs are a convenient scapegoat but if you look at what actually happened, this is the fault of bankers and bank regulators. Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s, and didn't have any regulatory red flags? Are we supposed to blame VCs for not knowing about the bank's investment problems when the regulators who were supposed to know about them didn't know either? Should we blame founders for taking banking advice from their funders and boards of directors? Are we supposed to forget that the era of easy money the article dislikes was created by the Fed, and that the duration risk on long-term securities that doomed SVB was also realized because of the Fed's reaction to its previous mistakes? We should blame everyone, including the government, for this mess. When people like the author single out VCs and rant about AI being a boondoggle it's clear they just don't like or understand tech. Tech has been the space program of our generation. We now carry devices in our pockets that put more information at our fingertips than entire civilizations could access throughout all of human history. Mobile payments have enabled entrepreneurial capitalism in impoverished parts of the world. Anywhere we are, we can get a map of our location and directions to anywhere we want to go. The scale and technology that makes remote work even possible for much of the population didn’t even exist a decade ago. Some pieces existed but they never would have scaled the way we needed them to. If you didn’t lose your job during the pandemic, you ought to be grateful to the major cloud providers for the fact that your video conferencing software was able to function while you and almost everyone else were piling onto it. You should also be grateful there were multiple delivery companies able to bring you groceries and restaurant food when you weren’t allowed to leave the house. I know restaurants are grateful for the delivery services — so many more would have gone out of business if in-person transactions were the only way to sell their product! Anyone who owned a total market index fund in the past decade has benefitted massively from the success of big tech, including most pension funds, university endowments, and many individuals. The creation of wealth has been enormous in scale and enormously socially beneficial. VCs made all those good things possible and if we also get dog-walking services and NFTs of monkeys that's a small price to pay.

breck 4y ago
> Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s YES! The $250K limit was literally in 100pt font (https://twitter.com/breckyunits/status/1635356025175027712 https://twitter.com/breckyunits/status/1635356025175027712). Amounts above that were at risk! Instead the government just ignored that, on a whim. This wasn't even in the fine print! Can you explain to me now what rules I can and cannot pay attention to? I can't.

AlbertCory 4y ago

No sympathy for the VC's or SVB, but they had me up until: >a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :) Letting people face the consequences of their venality? Now we're getting warmer.

samcal 4y ago
I don't know if you should knock government investment in technological development, seems to have worked pretty well for COVID vaccines, space shuttle for the Moon, and brutally convenient murder machines
- AlbertCory 4y ago
  Right. Like https://en.wikipedia.org/wiki/Solyndra https://en.wikipedia.org/wiki/Solyndra or https://www.technologyreview.com/2011/07/25/192832/lessons-from-sematech/ https://www.technologyreview.com/2011/07/25/192832/lessons-f... I don't know what "space shuttle for the Moon" means. Can you explain?
yamtaddle 4y ago
> So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :) These actually have a pretty great track record of, specifically, setting the direction of technological development. Often in a way that's more of a "here's what we want; now, private industry, go do it and we'll offer you X in return" rather than specifying the minutia, to be clear, but it's absolutely not a crazy notion. And I don't just mean NASA or the US MIC (DARPA, notably), but things like postwar Japan's heavily-government-directed R&D efforts and research-pooling initiatives, or Germany's skating-where-the-puck's-headed moves on renewable energy R&D and manufacturing back in (IIRC) the late 90s and early 00s. That we ought to rely on public efforts to direct technological development, at least to some significant degree, isn't obviously a bad idea.
- 4y ago

jdminhbg 4y ago

Tweet from the author [0]: > My debut at @Slate: Venture capitalists are parasites who couldn't be trusted with the financial institution that held up their industry, let alone the direction of our technological development. Euthanizing them is imperative if we want a better world. I probably wouldn't tweet out language about "euthanizing" "parasites" but maybe I just have a better grasp of history than the author. There are good critiques of everyone involved in this elsewhere, I have no idea how a reasonable person could conclude this is the one that should be posted and shared. [0]: https://twitter.com/bigblackjacobin/status/1635302872291381248 https://twitter.com/bigblackjacobin/status/16353028722913812...

brightlancer 4y ago
Maybe the author knows some history and just presumes he'll always be on the side flipping the switch. That kind of anger and _hate_ has become much more acceptable. Reasonable? No. Mainstream? Yes.

karaterobot 4y ago

> Remind me why, exactly, these guys have so much control over technological innovation? Oh, it's be because tech companies need money to operate, and when they ask people for some of their money, the people who give them the money demand input over how that money is used. Hope that answers your question.

cs702 4y ago

What is this drivel doing on the front page of HN? It's one thing to criticize venture capitalists for promoting libertarian ideologies on one hand, and then instantly turning around and asking the federal government to bail out their portfolio companies' bank accounts on the other hand. It's OK to make fun of them too. To paraphrase the late J. K. Galbraith, in the US we see socialism in action mainly when private jets start descending on Reagan national airport, their passengers seeking federal handouts. But the OP crosses the line into silly territory and keeps going past the line, with nonsensical statements such as "[the troubles at SVB] are emblematic of a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development." Left in charge? Of our technological development? That's not even wrong.

spprashant 4y ago

What ended up happening was right, and I am glad things are looking up now. The depositors had to be made whole and Fed in my opinion did the right thing in the end given the choices. But I have never seen the VC community so vocally begging for instant government intervention for anything else in my life. These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts. But when there was a fire in their backyard, they did not "innovate", "disrupt", or "take initiative". They hounded the government like entitled brats, to fix the mess which was in no small part their own doing.

twblalock 4y ago
> These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts. That's often the truth. The government does a lot of bad things, and a lot of regulations are bad. When someone complains about the government it doesn't mean they also oppose the good things the government does, and it doesn't mean they oppose the concept of government. Most VCs and major tech CEOs are Democrats. Look at their political contributions.
- spprashant 4y ago
  You do not set up shop in blue California districts, and not donate to Democrats. I do not think this necessarily correlates to the community actually being left wing. They actively lobby for reduced taxes, deregulation, and reduced worker rights. When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida.
  - twblalock 4y ago
    > When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida. No, there were a few loud ones. Most of them stayed.
    - 4y ago