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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, innovatio

by 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.
  - op00to 4y ago
    That sounds like a landscaper, no?

by fmajid 4y ago

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.
- op00to 4y ago
  That sounds like a landscaper, no?