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Comment by Scubabear68 | Hacker News Reader

An important stand out quote to me here: “ It’s fair to ask about the underwriting discipline of VC firms that put most of their liquidity in a single bank with this kind of risk profile“.

I really don’t understand why these firms didn’t use at least two banks for their deposits. Surely these tech firms have heard of single points of failure being problematic?

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This whole incident should disabuse anyone from believing that VC money is “smart money”.

If you get any kind of loan from SVB, you're required to keep your cash with SVB.

I think it was entirely reasonable for Series B and earlier startups to keep all their money in SVB. It was wrong, in hindsight, but reasonable. Bank failure is not the thing that's going to kill most startups. SVB just failed spectacularly, and it sure seems like it's not going to put anyone out of business.

“If you get any kind of loan from SVB, you’re required to keep your cash with SVB”.

Really? How would this be enforceable or even discoverable?

Discovery might be difficult but enforcement is pretty simple. If you have a loan and break the terms of service, they can call your loan due.

It's kind of like the terms of service on a home mortgage loan.

In other articles I've read where some of these VCs had "levers" into the bank where they could keep track of what their companies were doing. Not sure what exactly that means, or if it was legal, but it makes sense.

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