I'm struck by how many comments imply a certain amount of, "It was obvious" to this whole story.
Yet a lot of startups clearly were all in with SVB.
So what's the real lesson here for a startup?
Yet a lot of startups clearly were all in with SVB.
So what's the real lesson here for a startup?
b) don't bank where Peter Thiel and his friends bank. Cause they're panicy. Probably try to avoid anything he and his friends use heavily without commitments, where them pulling out will cause major immediate issues.
OP mentioned that there might be a service for that, and potentially also insurance that you can take out yourself for higher amounts.
> Insane that this is something that people now need to worry about.
Always has been, that is if you were just somewhat risk averse - more than one (unrelated!) bank account has always made sense.
FWIW, here in the EU we're only covered until 100k €, so 2.5 times as many banks required to spread safely ;-P
But, a lot of people do not need to have the cash around all the time, so one can but a big amount into relatively safe securities like S&P500 or for lower risk, which might be preferred here, gov bonds, and keep only the cash on hand for a few months of your expenses, which means most of the time two banks are enough, and having an account on two unrelated banks makes sense anyway - as if one has a bank run or fails completely you have still access to the cash on the other, for short-term things.
For companies this can work too, but they need a constant revenue stream matching their normal monthly expenses (e.g., salaries, office rents, ...) for it to work best.
It’s abstracted away from you and trivial to do. These startups just didn’t do it.
Call me crazy but I think a company with this much financial holdings would normally have a CFO that buys bonds that vest at the right times, and would have cried a tiny tear at getting less than ideal interest rates on them instead of having a bank collapse with all their finances because it wouldn't be competitive at recruiting more clients with zero financial management going forward.
Perhaps decades of no inflation and low interest expectations have left people confused to the fact that when you have millions you are an investment holding company.
https://www.fdic.gov/resources/deposit-insurance/brochures/i...
For this in particular:
>> "The FDIC insures deposits that a person holds in one insured bank separately from any deposits that the person owns in another separately chartered insured bank. For example, if a person has a certificate of deposit at Bank A and has a certificate of deposit at Bank B, the amounts would each be insured separately up to $250,000. Funds deposited in separate branches of the same insured bank are not separately insured."
Be careful of what hard dependencies you choose. The more dependent you are on a third party, or the more dependencies you have, the higher your black swan risk is. Of course, dependencies are a requirement to do business.
>Except in this case you want more “dependencies.”
More specifically, if you must have 3rd party dependencies, make sure you fully understand the risks, distribute exposure to adequately minimize central points of failure, and have failover procedures in place to reduce possible downtime.
The technical crowd that successfully run high-uptime web infrastructure with demanding SLAs generally understand this idea very well.
The more I keep reading about SVB, the more cultish it sounds.
This is a common banking feature called sweep.
This whole thing reminds me of the regular phenomenon where people in Silicon Valley think they are geniuses because they discovered SRO’s or buses or the fact that you can dig tunnels in the ground for cars or something.