Standard Treasury Acquired by Silicon Valley Bank
blog.zactownsend.com
blog.zactownsend.com
I have the highest respect for detailing the real reason instead of generic "awesome journey".
Moreover, being acquired by SVB sounds way better than average acquihire. You actually can execute your idea, but as part of other company instead of separate entity.
Blame the Fed, I guess? De novo charters aren't being handed out anymore apparently, so you either have to acquire a charter, or be acquired. It's a pity VCs don't have the gumption to play the game, so Standard Treasury ended up going with the latter route.
They are, though not many (I think two in the last four years); a big part of that, AFAIK, is that applications (and, perhaps more fundamentally, investors willing to supply capital for de novo banks) have dried up since the 2009 financial crisis, though several sources this year have reported signs of a potential incipient rebound in the space.
The problem with acquiring an existing bank is that for any tech company, you are likely to be changing the business purpose of the acquired bank, so you'll need to basically go through the de novo process again.
Either way, you're looking at 5+ years to get a charter that you can use to run any new digital banking business.
And then there are the capital requirements. The capital required to launch a Bank is tremendous. You need to have sufficient capital against your projected future deposits. Way out of the range of VCs. And only a limited number of PE firms play in that space.
And even if VC's did have the financial resources, the returns are dismal. Chartered banks, particularly new charters (either de novo, or acquired for a new business purpose) are limited in their growth. A very fast growing bank might grow 50-100% yoy. The return on capital equation just doesn't work out for VC capital.
It doesn't make much sense either for PE firms, given the limitations imposed by the Bank Holding Company Act.
tl;dr, this shit be hard.
Is it limited supply or limited demand? While I've seen some articles pointing to higher FDIC standards, I've seen others indicating that the market conditions that are historically linked to high levels of de novo applications simply haven't existed since the crash, though there are some signs conditions are edging toward them.
> Prior to 2008, 100's were issued annually.
Prior to 2008, those new banks were almost without exception chasing the then-booming real estate loan market, whose collapse was a central element of the crash. Those hundreds annually in the years just before the crash were a symptom of the bubble that was about to burst.
You're right on the prior to 2008 comment, but it was indicative that any bum and their mortgage broker could get a charter. But tech companies who are (hopefully?) less shady, can't.
They send passwords in plain text!!!! WTF!!!!!!!!!!!!
They would be an even more attractive partner if they didn't always throw a wrench in the works when you are trying to do an orderly liquidation of your company. It's pretty horrible when you realize that Chase had been a (much!) better banking partner. They talk a good game, though.
When you are trying to get 100% of the investor's money back after a hard run that didn't make, it makes one feel a bit raw to have sand thrown in your gears in process. And the cool thing about getting investors whole is that they'll show up to your next party. If I had remained a fan of SVB, the investors would not have allowed them back at the table after some of the things that occured. If all that SVB is is money, I can that from GE Capital. I start to question what value they are bringing to the table.
I know-- anecdote is not data and all that.
None of this is meant as commentary against what's going on in the head-line story. I could see this being a solid win for both parties. Yay. I like happy middle-ings.
https://thinkcomp.quora.com/In-Fifty-Days-Payments-Innovatio...
Put a blockade up, and people will innovate around it. Engineers are not known for going gently into that good night.
I'm not saying that innovation isn't possible -- I'm just saying that it has to come from within the establishment.
https://www.regalii.com/blog/why-do-the-best-fintech-startup...
If you're a payments business and cash passes through your balance sheet, then transmission regs apply.
If you're moving bits, but not money, they don't.
And if you have a bank charter, or bank sponsorship, you're mostly exempt from them.
It's worth asking why not. I think we know...
It's also worth pointing out that they were quite relevant for Simple (your company), which ended up in a similar position.