OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
businessinsider.com
businessinsider.com
If documented its no problem and not uncommon at all in Germany.
In fact many business owners pay something like credit card bills personally and reimburse through the company later.
What is weird/scary (especially when not documented clearly and in advance) is moving your entire bank balance into a personal account. Aside from government/tax/legal, you'd have your investors (in a venture/angel backed company) to justify it to. It's justifiable in this truly exceptional case of SVB imploding and no other bank account being available. (It gets harder to justify in a larger company with lots of investors and more money involved; moving a $100mm balance in a company where you were down to 10% ownership to a personal account even in this situation would be weird AF and depending on the banks involved might cause you problems. I probably still would have emailed counsel and investors/etc. on thursday morning to ask what to do; likely would have sent it to lawyers to handle actually in the huge-account situation.)
Now you've got a weird thing to explain and no vindication.
Generally the law handles this through the "reasonable man" standard; i.e. "would a reasonable man, knowing what you did at the time, have done what you did?" This would allow you to shoot someone in self-defense who was holding a realistic looking toy gun at a child (which you believed to be a real gun, unlawful intent, etc. at the time).
I’m comfortable doing exactly as GP described to make payroll.
As others have noted it's not embezzlement/commingling and given the scenario "Wire out from SVB corp account to personal, document exact amount, and wire back to corp $NEWBANK a week/days later, document again" would hardly cause any heartburn now or down the road. Many would see it as responsible, proactive, and heroic.
Depending on the amount the only issue would likely come from your personal bank - I know of people with ~$10m at SVB and I have to imagine all of sudden wiring those kinds of funds to a personal account with an average daily balance that's a fraction of that would raise some alarms on the personal account - or maybe not as I can imagine the big big banks (BoA, etc) probably saw a lot of this on Thursday...
(I am pretty confident there will be at least 250k + 50% advance-dividend early this week, and still optimistic but far from certain that a buyer will take the whole thing and it will be 100%. Last time people actually took losses of 50% above the FDIC amount (100k at the time) was 2008 (IndyMac).)
My startup has about $25k in SVB - but we don't have payroll and I have personal access to that without impacting me if push came to shove (paying contractors, etc). I was aware of the situation and probably could have gotten the funds out but I knew we were well below the FDIC threshold and just didn't want to bother with it (frankly). I would have had more anxiety executing the wire and waiting for it to show up on the other side...
Speaking personally I'm actually kind of curious to see what the FDIC process looks like - in the grand scheme of things it makes you part of a relatively small club! While I know people are suffering and the situation is a lot worse for many I'm actually looking forward to telling the story when appropriate.
The general population is already fascinated by startups and I've had more than a few "civilian" friends reach out to me asking about the SVB situation. When I tell them we're kind of impacted but not really they just kind of chalk it up to another "Wow, startup life is so wild even THE BANK failed".
Additionally I'd say the same - through various startups I've worked with SVB for over 15 years and the people have always been great (systems not so much).
I call B.S.
Something doesn't add up. Coming from an anon account no less.
FWIW, Just looked at the screenshot of the wire completion and it does say "Same day". But I did it at after 8pm. Anyway, I felt I did the safest thing to keep the staff from freaking out and for me not to be too stressed through the weekend. I'll have enough headaches moving banks the next two weeks to also be worried about payroll.
You are learning a lot and sounds like you figured out a way to not have your employees see any hiccup. Well done.
Thank you for replying and providing more info.
Nowadays one must assume ChatGPT bot/shill when talking to a new account.
Securing alternative funding for your payroll makes sense and is commendable.
The bank was closed on Friday, and at the time an announcement was made that the Deposit Insurance National Bank of Santa Clara would open with all insured deposits on Monday (this will not happen if between now and Monday a buyer is found and that bank instead takes over operations on Monday.) There’s not really a “disbursement” of insured funds, just a transfer to a new bank, which may or may not be run by the Federal government.
For uninsured funds, the announced plan (which also might be cancelled if a bank takeover provides better terms for them) is to provide an initial dividend during the week, and a “receivership certificate” for any remaining uninsured balances. Most likely (given history) a bank takeover would also preserve uninsured balances as normal deposits at the new bank; but that’s not guaranteed.
Other threads over the past few days scoffed at having 100-200k in cash available.
the people with less money are much more vocal about it, for obvious reasons.
It is a bimodal distribution of (1) the lucky ones and (2) the ones either "not yet lucky" ones (1/10) or the "never lucky"ones (9/10).
I find it refreshing to hear stories about how things did _not_ work out (from the sources). It is much harder to get the real stories behind the successes because people tend not to ascribe things to luck but create some story after the fact in the same way, as they say, "the winner writes the history".
in other words, if you ascribe success to nothing in particular other than luck, why do you put more stock in the negative case? couldn't failure be caused by nothing other than bad luck?
reading failure stories to look for what to avoid might not be the right strategy if you believe in a world where luck dominates.
the accountants just classified it as a reimbursed expense. you just comp yourself the exact same amount as the payroll and it isn't taxed as income.
in general accountants have ways of dealing with all sorts of edge cases, but you need to keep REALLY good documentation and notes about what/why/how, etc. "i thought the bank was going to collapse, and then it did" is a pretty good reason.
wiring yourself the money and moving it to a new business bank account would have been perfectly fine too - you're simply moving the cash to another location. in fact i'm pretty sure that's what most people who got their money out of svb did - very few small businesses have multiple checking accounts.
Who else?
* one of the last things I want
Garry is shouting from the rooftops that more than a million jobs are going to be lost if the fed doesn’t immediately do something (that we all know it isn’t going to do). I wouldn’t want to be a YC startup right now, listening to Garry stoke panic.
Kudos to sama for being pragmatic and calm.
They’re trying to sell it first but if that doesn’t work they don’t really have other options if they don’t want to be dealing with massive job losses and multiple bank runs next week.
The bank will re-open, companies will get most of their money, and life will carry on. The FDIC aren’t going to guarantee 100% of deposits, and shouting from the rooftops that a million jobs will be lost if the FDIC don’t do it (which they won’t) is panic-inducing for no discernible reason.
Edit: I intentionally took one for the team by embarrassing myself with a claim disproven less than an hour later. You’re welcome.
Anyway we'll see what FDIC does. They're good at what they do.
I agree the fdic has done this before and if they can find a buyer or communicate well it should turn out fine next week.
There is a risk of contagion though and a risk of job losses if money is delayed for say 6-12 months. I don’t think it’s unreasonable to be worried about it if you’re impacted.
Right below that there’s another bracket of “trying to tweet through it”, a lot of the folks behind the We Support An SVB Successor thing, which then, as Paul Graham did, lectured people that they can’t really do anything because their LP agreements forbid it.
Didn’t know YC was a non-profit and Paul’s involvement was a $85k salary and no carry/returns…
Push came to shove, some people stepped or are stepping up, some didn’t.
https://www.ottingerlaw.com/blog/wages-hours/employer-not-pa...
Severely is overselling it.
(And if any terminal paychecks are late, there are greater penalties – waiting time penalties equal to an average days pay for each day of delay up to 30 days – though I don’t recall if there is a wilfullness condition or modification to that.)
2) What on earth does this have to do with running payroll late?
“Established precedent” is…not a fair description of action which is being challenged in the courts, where no precedential legal decision has been made.
Also, firing employees would just make the California rule requiring immediate payment of final paychecks, with waiting penalties of 1 days pay for day of delay up to 30 days, applicable, as well as triggering other time-sensitive legal obligations that a company without access to cash might not want.
Plus, it means that once you get access to your cash again, you don’t have the employees (and might have a lot less positive image in the community you would want to hire from to replace them.)
They're batch processes, done by dedicated payroll firms, since there are lots of tax/other obligations as well.
Missing payroll by even one day causes 1) lots of drama with employees 2) starts some legal problems 3) potentially screws up people's healthcare/other benefits 4) potentially causes tax problems. Some of this is with the state, some federal.
Payroll is basically the second to last thing you want to miss (certain government obligations above it, since they have liability for the officers directly).
(This is mostly because employers are presumed to have a lot of power vs. employees, and generally do, and there have been a lot of historical abuses of companies paying people slowly, withholding wages, etc., which puts the employees in a position of "do I quit and guarantee I don't get paid, or do I work a little bit more and maybe collect what I'm owed" and then companies continuing to abuse it...)
The US largely does payroll biweekly (every two weeks). Sometimes weekly, although usually not in tech. It isn't like Germany or whatever where payroll is only once a month.
Weekly, biweekly, monthly, and semimonthly are all common; In most states, there are rules setting minimum frequency (and sometimes regulating on what days as well as frequency), and they may vary by industry and job type. E.g., for California: https://www.dir.ca.gov/dlse/faq_paydays.htm
Unless it is at least willful, its probably not a crime. It is, however, generally illegal and carries a civil cost even when not criminal.
> Sam has been sending stuck startups money today with no docs, just saying 'send me back whatever you can whenever you can'
May or may not be front-page worthy (and regardless of the PR potential / optics), this is Sam walking the talk, as it were.
As other commenters state, if you know that a boss does this for you, then you now know a good boss to have. Though, most bosses won't tell you they did it, obviously.
Humble brag?
Cashflow won't be what kills some of these startups.
More like, the startups that are saved will be a mixed bag of worthwhile startups and dead-end startups. Meanwhile some worthwhile ones will sadly be left behind with the dead-end ones.
Aside from that timing is always a thing. There's certainly a company out there that is 8 months away from proving the soundness of their idea that now only has six months of funding, or whatever.
The idea that in every case, "the market" or whatever will arrive at the most perfectly correct conclusion is silly at any time, but particularly in one of uncertainty and upheaval.
Indeed, I think there's good reason to expect it to be more just given that what we're talking about is mostly a short-term cash crunch that's easily explained. E.g., one company is raising $1 bn for bridge loans: https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to-rais...
That kind of support is not something marginal startups have access to in normal times.
Running a startup means time is never on your side. If you are still 8 months away from proving "soundness" of your idea then you are already too late.
Is it? I thought it was that startups with exciting books and good networks get a chance to ratchet into the next round of funding.
Great startups drown all the time for not being a VC rocketship, when they they could have grow into a perfectly successful cruiseliner under traditional fundraising or bootstrapping.
If investors are “nah pass”, it’s more about making a quick decision about near-term finance opportunities than the mid-term or long-term strength of the underlying business. VC investors inherently care more about 10x exits than sound business practices.
If the business is profitable, it will survive.
If its still relying on free money to pay the bills, its time to make it profitable.
The most bestest startup in the world would still be relying on investor's money to pay the bills if it's just starting to build its product and the time to make it profitable will come in a year or two or more (e.g. a biotech startup can take many, many years until the product gets approved for patients and earns its first cent).
Yes, if a business has "grown up" from being a startup and is fully self-funding not only its operations but also its growth, then it will survive, but the definition of a startup is something that's still trying to reach that stage and isn't there yet.
For the past 10 years or so none of the "successful wrothwhile startups" have positive cash flows, and those that seemingly do still manage to post hundreds of millions of dollars in losses yera after year after year.
The whole modern startup business is either "work at a loss until a successful exit for the founders" or "work at a loss forever with no expectation of profitability for some reason".
None of them are worthy.
A start-up that fails because of this mismanaged their treasury, didn’t pull money in time, couldn’t borrow against their claims and couldn’t convince anyone to advance payroll. That’s reflective on leadership. It’s a teachable moment. But it points to deeper naivety.
Assuming that the SVB unwinding is more than a hiccup in cash availability, what will determine who gets saved will mostly come down to affinity and luck. Promise and value are a sort of first pass filter, but startups are just plain noisy and chaotic field.
From a pure financial point of view Uber would never be viewed as a startup that was worth saving… for it’s investors the whole point of the IPO was to cash out and leave someone else holding the loss making baby