Comment by hef19898 | Hacker News Reader

Comment by hef19898 | Hacker News Reader

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Back the day, when I still tried to get my own boot-strapped start-up of the ground (I didn't succeed), I always made a point in working, were needed and when mission-critical, with large, legacy and global vendors. That included software (it came from Wisetech for everything ops relevant, and MS for the rest), insurance (Allianz), banking (I used a local, decades old bank that is part of a national network of similar banks using the same brand and offering all the account security one can imagine)... Why on earth would a SV start-up put its tens to hundreds (?) of millions in a bank that is not too big to fail? And why is the money sitting in a single bank, instead of multiple conservative and secure ones? Deutsche Bank won't go under ever, neither will UBS.

SVB sounds like one of those start-up like fintechs that constantly advertise on Youtube for everything from insurance to taxes to banking, assuming Youtube users are on average to young to know that solid, legacy solutions for all of this exist already.

A big part of it is exclusivity and branding.

I banked with SVB with my first startup. It got the job done, but the UI sucked, and there was nothing special about it compared to other banks. It was actually a very inconvenient bank to work with because SVB doesn't have any public branches so you can't walk into SVB and deposit a check or withdraw cash, it's all done over the phone, by mail, etc.

When starting my 2nd startup, I applied for an account and was denied. (What kind of bank denies a client an account?)

To be a SVB client, you need to be networked with other SVB clients (e.g. investors banking with SVB). This creates a big bubble where all of SVB clients are interconnected with one another, which might have been a good growth strategy for SVB by being "the exclusive" bank to be accepted into, but at the same time creates major concentration risk when all clients are in the same/similar industry (tech) and backed by the same group of investors.

SVB is not a fintech startup, it was founded in 1983 and is a big "oldschool" bank: https://en.wikipedia.org/wiki/Silicon_Valley_Bank

You are right about it not being a fintech startup, and 40 years is a lot for those (as well as tech companies). But even then Apple, Intel, Oracle are all older than SVB. And in the banking industry, 40 years is nothing really. The "oldschool" banks have usually gone through a history of mergers and acquisitions for hundreds of years. Usually this means founding dates somewhere in the 19th century, say Deutsche Bank which was founded in 1869.

Because working with "legacy" institutions is anywhere from a monumental pain in the ass to literally impossible depending on your business.

AML/KYC/etc. has utterly destroyed the ability to do anything that isn't "industry standard" and super boring. Do anything whatsoever just a tiny bit interesting and you will find your banking access cut off or severely restricted.

After dealing with that mess, I can absolutely see why founders avoid it. They are there to build a business, not dick around with compliance officers all day.

So, again something VC backed start-ups cannot be bothered with, after taxes and general compliance we have the pains of traditional banking. Something every fast food truck or small retail store manages on a daily basis.

And this refusal to follow existing rules and practices of how businesses are generally run, opens up an opportunity for all kinds of shady, borderline grifters. Sorry, I meant disruptive start-ups. But hey, it's not my money after all.

HSBC did quite a few interesting and innovative things with certain organizations in Mexico, in fact more so then any 'fintech' challenger bank I've heard of, and I'm sure lots of banks would take on a similar level of risk for more legitimate enterprises in the Bay Area.

You just need to have billions moving around every month, with very high fees, to make it worth the time to take on that risk.

In the case of HSBC,

> So rampant was the practice, prosecutors said, that on some days drug traffickers deposited hundreds of thousands of dollars at HSBC Mexico accounts. To speed things along, the criminals even designed “specially shaped boxes” that fit the size of teller windows at HSBC branches, according to the documents.

https://www.reuters.com/article/us-hsbc-probe-idUSBRE8BA05M2...

Now that's financial innovation!

what the hell are you even talking about? what is an "interesting" banking function. I have been a banking client as a regular person and with big banks and sell side brokerages and they were all focused on facilitating our business. if you want stability and not to have your shit taken by cartels when you get big enough to be noticed, you have to operate in a jurisdiction with law and order and rules. there are no "interesting" startups in places with no rules.

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