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Comment by pbk1 | Hacker News Reader

why don't Silicon Valley firms partner with existing smaller banks looking to do more with their balance sheets? seems like if their ideas are truly disruptive it would be a win-win for both parties.

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Banks are heavily regulated and the government forbids such investments.

> The FDIC permits insured state banks and their subsidiaries to undertake only safe and sound activities and to make investments that do not present a significant risk to the deposit insurance funds

https://www.fdic.gov/regulations/laws/bankdecisions/InvestAc...

There's still room for innovation and partnerships with startups, though, even if they can't do something wildly disruptive*. For example, I originally found out about CreditKarma because my bank had partnered with them in order to incorporate a credit monitoring widget into their online banking portal.

They don't have to make risky investments in these companies. They could collect the deposits and provide them to betterment/wealthfront, while they split the fees. The robo-advisors could cut their acquisition team and focus on the algorithms and the small banks could cut their advisor staff. It's basic synergy.

It's a risk free method for partnering small banks with innovative companies.

Individual investors are impatient and so only large institutions with a track record of being long term investors are the ones who get access to top quality VC funds. Because of the power law those are the only ones that make money. So you would need a big enough pool of capital first and then build a track record of being an LP.

we are starting to see that, A16Z made an investment last year into a smaller bank

https://techcrunch.com/2016/11/01/cross-river-bank-gets-unco...

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