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Comment by mellosouls | Hacker News Reader

I think the idea that tech is going to be set back a decade if a load of YC companies fail is an interesting assesment from the head of YC, and might be interpreted by some as hyperbolic and self-aggrandizing.

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This is complete hyperbolic bullshit with the sole purpose of pushing a narrative, getting the right people concerned about their political image, and getting parachute out of this mess fast.

Can't blame the guy for doing his job, but you can call bullshit on him.

Agreed, and he really lost a _lot_ of respect from these tweets today

The real cost to startups is in management attention. If you're running a YC-funded startup, and got hit by this, it's going to occupy your attention for the next week at least, and probably the next month. The skills needed to deal with this are way outside the skill set of most tech founders, and even outside the skill set of most bankruptcy lawyers. You're going to need corporate lawyers and people who can evaluate deals in SVB receiver certificates. There aren't many people who do that sort of thing, and by now, they're probably all booked up.

And what are those founders going to do? They're going to call up YC, which funded them and has board seats, and ask for instructions. YC probably told them to use Silicon Valley Bank.[1] So now YC has some responsibility to untangle this. It's probably in YC's interest to find a bulk buyer for SVB receivership certificates. If they don't, all their startups will be losing a month or two of management distraction while dealing with this problem.

For YC to take the lead on getting a market going in that stuff makes a lot of sense. They're the largest interested party. There are probably people at YC right now working the phones, trying to find a buyer for that paper.

So, priority is to get through the next two weeks while somebody works out a longer term solution. Keep track of which founder teams deal with this well. They have potential in running a larger business.

[1] https://www.svb.com/account/y-combinator

YC isn’t the only set of companies that used Svb, they’re probably representative of the distribution of startups that need banking

Roughly 50% of all venture backed startups in the US have an SVB account. So yes, it's much larger than just YC.

How could someone think that this was a really good idea? It's like joining a pension fund with the average insured being over 50. Distribute risk whenever possible.

Generally agree. I run a startup and we have a few bank accounts. Luckily we were able to pull what we had in SVB (around 35% of cash reserves) on Thursday.

I think a lot of startups are in this situation. They have SVB accounts, but likely don’t have all of their money in there.

One thing to remember, SVB is very founder friendly. Often giving companies favorable lines of credit, giving founders favorable mortgages, etc. They helped us tremendously with our PPP loan, and are also deeply integrated with products like Stripe Atlas.

It was the 14th largest bank in America. This is the second biggest bank failure in history.

Yes but if companies collectively recover 80-90% of the capital, the additional context is extremely relevant.

There is absolutely no evidence people above FDIC limits will recover “80-90% of the capital”. It’s a guess, a crapshoot, and it’s not taking into account historical loss rates for banks of this size that were seized by the FDIC. See also: IndyMac, WaMu, etc.

And whatever they do get back above FDIC limits, it will not be immediate. Months at a minimum.

I expect the losers in SVB will be the same as for WaMu: bondholders, shareholders, and investors. No reason yet to expect depositors will suffer anything more than inconvenience. And if, like WaMu, the FDIC can rapidly effect a sale to another bank that inconvenience could actually be quite short.

WaMu:

"The closure had no immediate effect on depositors. All deposits even those above the FDIC limit were transferred to Chase. As the FDIC stated, "No one lost any money that was deposited in Washington Mutual Bank." In addition, all existing WaMu CDs were honored by Chase to maturity."

-- https://www.depositaccounts.com/blog/2010/09/twoyear-anniver...

Looks like for IndyMac, uninsured deposits got paid back at 50 cents on the dollar.

If this is like WaMu, the bank opens on Monday and everything goes back to normal. If this is like IndyMac (or worse, Silver State Bank, 11 cents on the dollar recovered), a bunch of startups are now fucked companies.

Might be some politics going on this weekend.

I honestly expect their will be an acquisition on Monday, with a lot of executive (whitehouse) pressure behind it. So much of the American economy is based on a tech advantage as is its national security. I could of course be completely wrong.

Its not just YC. Its the second largest bank failure in history, and concentrated in this Industry. It could get ugly.

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