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Put another way, this is a list of VCs that prioritize their portfolio companies health and success more than their personal banking relationships or public per

by dahdum 4y ago

Put another way, this is a list of VCs that prioritize their portfolio companies health and success more than their personal banking relationships or public perception. That’s a pretty strong signal to future startups they’ve got your back when the shit hits the fan. I’m not saying it’s good, but I’m betting a lot of founders are feeling pretty thankful. The bailout was never guaranteed.

deleted 4y ago
[deleted]
tsunamifury 4y ago
No. There was only a 1.8 billion dollar temporary hole in the books. If they wanted to they could have plugged this in minutes and ensured their partner in banking survived. Then cashed out with 1:1.01 tbills or whatever in its stead. Follow on benefits would have been a statement of strength and cooperative SV culture. Instead they panicked like children and told everyone else to panic too It’s not a good look and it broke trust in SV.
- pas 4y ago
  yep, even though it seems "can't find their own mouth" level incompetence to try to raise cash through equity sale (which prompts everyone to think about their situation) instead of getting a loan, but they may have already exhausted that option. ... though finance is very much about connections, charisma and acting tough, and backchannels. aaand sometimes fundamentals. it's very hard to know if they could have organized/coordinated/managed to put together a rescue package. there was a 15B liquidity hole after all. https://blogs.cfainstitute.org/marketintegrity/2023/03/13/the-svb-collapse-fasb-should-eliminate-hide-til-maturity-accounting/ https://blogs.cfainstitute.org/marketintegrity/2023/03/13/th... by forcing a bank run and crying about payroll they managed to get the government to step in and basically undo SVB's bad deals, at the cost of sacrificing SVB itself. but VCs are happy now, they had the opportunity to both enjoy SVB up to now and have a financially zero-cost exit. if the fallen SVB management gets the same treatment as the fallen WeWork management their egos will be fine at the golf courses.
  - fmajid 4y ago
    As a former SVB customer, they understood the needs of startups like no other bank, and this will have adverse implications for the startup ecosystem, innovation and future economic growth not just in the US but also China and Europe. The incompetent top management who invested deposits in long-maturity T-bills with mediocre rates are not the same as the front-line personnel who had the relationships with the startups. As for moral hazard, past bonuses for executives including the past Chief Risk Officer who left a year ago and cashed in her chips can and should be clawed back.
    - op00to 4y ago
      Why do tech startups have different banking needs than other ventures?
      - fmajid 4y ago
        Lots of cash, lumpy or no revenue, no credit history, need to lease equipment like servers for those that run in a data center. Mitchell Hashimoto of HashiCorp describes it here, even if his is an extreme example: https://mitchellh.com/writing/my-startup-banking-story https://mitchellh.com/writing/my-startup-banking-story
        pas 4y ago
        But that's not really different from boring low-volume high-margin retail. Let's say a car dealership. Or basically consumer banking for anyone without a biweekly/monthly income. Or anyone who goes on vacation. Let's say I open a bank account, put my savings there and go on a long unpaid leave and spend a lot of it. Banks are just picky, because they can be (and because regulation makes it hard to have a boring bank, so there's no competition). Because banks still don't understand the business they are in (because they can be dumb, because regulation, etc), as the Hashicorp story illustrates. People want dumb banks, but banks make money buy upselling shit to people. So banks are basically evil MLM machines instead of trusted/trustable financial partners for people. (Because the people who actually need financial support will get taken advantage of in less time than it takes me to type this. And those who don't need it are constantly annoyed by the scam machine. Rightfully.) And, ridiculously, Chase spent time and effort educating tellers in case the next startup ends up opening an account at them ... instead of making sure that they provide a good service so that founders choose them. And that story is perfect. Everything went as expected. Nobody bothered the startup. Yes, closing the account was harder than imagined, because they were impatient, still they got it done in 2 days.
- danielmarkbruce 4y ago
  If you read the SEC filings, there was a 12-13 billion hole in their balance sheet. The 1.8 was simply accounting rules which say they only have to recognize the giant hole when they sell and they sold some of the assets in question. Marked to market, ie assets marked to real prices instead of fantasy prices, they were toast. People who looked at SVB financials knew it was a train wreck. They behaved like serious investment professionals and pulled their money.
notacoward 4y ago
No, a strong signal would have been providing material support to portfolio companies harmed by the collapse, instead of just signing an empty statement.

by dahdum 4y ago

deleted 4y ago

[deleted]

tsunamifury 4y ago

No. There was only a 1.8 billion dollar temporary hole in the books. If they wanted to they could have plugged this in minutes and ensured their partner in banking survived. Then cashed out with 1:1.01 tbills or whatever in its stead. Follow on benefits would have been a statement of strength and cooperative SV culture. Instead they panicked like children and told everyone else to panic too It’s not a good look and it broke trust in SV.

pas 4y ago
yep, even though it seems "can't find their own mouth" level incompetence to try to raise cash through equity sale (which prompts everyone to think about their situation) instead of getting a loan, but they may have already exhausted that option. ... though finance is very much about connections, charisma and acting tough, and backchannels. aaand sometimes fundamentals. it's very hard to know if they could have organized/coordinated/managed to put together a rescue package. there was a 15B liquidity hole after all. https://blogs.cfainstitute.org/marketintegrity/2023/03/13/the-svb-collapse-fasb-should-eliminate-hide-til-maturity-accounting/ https://blogs.cfainstitute.org/marketintegrity/2023/03/13/th... by forcing a bank run and crying about payroll they managed to get the government to step in and basically undo SVB's bad deals, at the cost of sacrificing SVB itself. but VCs are happy now, they had the opportunity to both enjoy SVB up to now and have a financially zero-cost exit. if the fallen SVB management gets the same treatment as the fallen WeWork management their egos will be fine at the golf courses.
- fmajid 4y ago
  As a former SVB customer, they understood the needs of startups like no other bank, and this will have adverse implications for the startup ecosystem, innovation and future economic growth not just in the US but also China and Europe. The incompetent top management who invested deposits in long-maturity T-bills with mediocre rates are not the same as the front-line personnel who had the relationships with the startups. As for moral hazard, past bonuses for executives including the past Chief Risk Officer who left a year ago and cashed in her chips can and should be clawed back.
  - op00to 4y ago
    Why do tech startups have different banking needs than other ventures?
    - fmajid 4y ago
      Lots of cash, lumpy or no revenue, no credit history, need to lease equipment like servers for those that run in a data center. Mitchell Hashimoto of HashiCorp describes it here, even if his is an extreme example: https://mitchellh.com/writing/my-startup-banking-story https://mitchellh.com/writing/my-startup-banking-story
      - pas 4y ago
        But that's not really different from boring low-volume high-margin retail. Let's say a car dealership. Or basically consumer banking for anyone without a biweekly/monthly income. Or anyone who goes on vacation. Let's say I open a bank account, put my savings there and go on a long unpaid leave and spend a lot of it. Banks are just picky, because they can be (and because regulation makes it hard to have a boring bank, so there's no competition). Because banks still don't understand the business they are in (because they can be dumb, because regulation, etc), as the Hashicorp story illustrates. People want dumb banks, but banks make money buy upselling shit to people. So banks are basically evil MLM machines instead of trusted/trustable financial partners for people. (Because the people who actually need financial support will get taken advantage of in less time than it takes me to type this. And those who don't need it are constantly annoyed by the scam machine. Rightfully.) And, ridiculously, Chase spent time and effort educating tellers in case the next startup ends up opening an account at them ... instead of making sure that they provide a good service so that founders choose them. And that story is perfect. Everything went as expected. Nobody bothered the startup. Yes, closing the account was harder than imagined, because they were impatient, still they got it done in 2 days.
danielmarkbruce 4y ago
If you read the SEC filings, there was a 12-13 billion hole in their balance sheet. The 1.8 was simply accounting rules which say they only have to recognize the giant hole when they sell and they sold some of the assets in question. Marked to market, ie assets marked to real prices instead of fantasy prices, they were toast. People who looked at SVB financials knew it was a train wreck. They behaved like serious investment professionals and pulled their money.

notacoward 4y ago

No, a strong signal would have been providing material support to portfolio companies harmed by the collapse, instead of just signing an empty statement.