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Comment by version_five | Hacker News Reader

So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke.

It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. It might as well be a bunch of FAANG employees

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> prominent VCs behaved during the brief period of uncertainty

A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll.

> For some silly reason I had some respect for the startup industry before this, now I see it as a joke

Wait seriously? You somehow lost more faith from this than you did from

- crypto - Adam Neumann - $100m seed rounds

and like 30 other things???

> But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new.

What are you even talking about?

Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

Then you put your funds in less risky banks who did not lobby to get an exemption from the regulations that protect against precisely this kind of thing. Even, spread it around safer banks.

Putting all of one's money in a bank because they have better returns or other investment opportunities is business. Not something that someone can be safe at the public's expense.

The public, because the public will pay for this one way or the other - if this is paid from the insurance that insures all banks like how the statement says, then it will cause all the banks who pay into this insurance pool to reflect it on their customers with fees. So every single person with a bank account in the US will pay. Its still public money, but it doesnt come directly from the US govt.'s pocked, so its 'okay'.

Especially given that an adequate alternative to putting all your money in one bank is to put it into two banks. Unless you're already on thin ice, that solves the short-term cash flow problem. Historically, even in bank failures, depositors get most or all of their money back, it just takes a while.

And if that isn't adequate for a given company, it sounds like it's time for them to hire a finance professional who has experience with cash management.

What large bank is not lobbying against regulations?

SVB didnt lobby to relax the laws against unpaid overtime, faulty advertising etc. Not any banal evil like that. SVB lobbied against laws that protected both the bank and its depositors from the very thing that happened. And succeeded to get an exemption for itself.

> A ton of the prominent VCs were writing out checks from their personal bank accounts

Is this true? I've been following this story pretty closely and haven't heard anything about that.

Yep. A few dozen said so out loud, Sam Altman included. Mostly “publicized” via Twitter or other lower profile means.

Are these substantiated reports or just tweet promises?

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

But that is the risk founders chose when they put their money in (a) any bank and (b) specifically SVB.

Your money is only insured to $250k. SVB had no CRO, lobbied against regulation, made no efforts to comply with Basel 3 and was engaging in risky bets that many had previously warned about.

CEOs have a fudiciary responsibility to understand and mitigate risks. And expecting taxpayers to bail you out (either directly or indirectly) when your incompetence causes harm is simply not fair.

Don't forget the benefits they got from white glove treatment and easy access to loans. This wasn't a one way street, there was a reason they deposited the money there.

What loans? SVB's problem was that its customers didn't need loans, since they had VC money and just needed somewhere to put it.

> CEOs have a fudiciary responsibility to understand and mitigate risks

This is an impossible standard to hold founders of 10-100 person startups to. Might as well say "CEOs should be omniscient"

The CEO of a 10 person startup I could understand not being on the ball with this.

But not the CEO of a 100 person startup.

100 people is large enough to have a substantial amount of human time available for use, and likely budget as well.

You think the CEO of a 100 person startup should be worried about something like a bank run happening? It's not the 1920s. Most people don't ever consider that money in their bank could disappear for no reason.

Next you should tell me they should worry about "the big one" hitting Silicon Valley which we know the actual odds for and people still seem to live there.

> Most people don't ever consider that money in their bank could disappear for no reason.

Geez. Let’s hope you’re wrong. Financial illiteracy is bad news in a society built on markets.

I can’t speak for “most people” and especially not people in Gen Z, but otherwise, as a matter of fact, many people do think about that and manage their money accordingly.

Bull shit, 99% of people that use the banking system do not worry about bank runs.

Do 99% of people have more than the $250k in their account?

Of those who do, I wonder what percentage would be worried about that risk?

Maybe more than 50%? 75%? 80%?

No, a CEO of a 100 person company should be delegating stuff like this to people with expertise in such matters.

A startup CEO isn’t going to be an expert in everything, no matter how much some people worship them.

> Most people don't ever consider that money in their bank could disappear for no reason.

The $250k FDIC account limit was really well known, so I'd expect someone in the CxO ranks to have it properly managed in a 100 person startup. CFO maybe?

Several people have mentioned over the last few days that spreading $$$ across a bunch of ($250k limit) accounts at banks is a service offered by third parties, to address this very risk.

Wonder what the cost of using such a service would have been, and how many SVB customers were using it?

Anyway, with the current US regulatory approach of "oh shit, lets cover all deposits anyway" I wonder if those services have a future...

> It's not the 1920s.

Is that a good thing or bad thing? :)

>> Next you should tell me they should worry about "the big one" hitting Silicon Valley

The big one as well as this banking debacle should both be on your radar, yes. You are in this for the money. You have money but you want to increase the amount by orders of magnitudes. So you gamble.

You gamble on lots of things so that you spread the risk. Gamble gamble gamble.

Hey, you know what? I sat on three different poker tables this evening. Lost all. I'd like my money back. Now, please.

Yeah the absolute degenerate gamble known as putting a check in a bank.

And most of the feasible scenarios in which banks start collapsing so quickly and widely that depositors end up with barely anything left bar the FDIC insurance are scenarios in which the economic outlook is so grim your startup that's relying on rapid growth and further funding to survive isn't going to make it anyway.

Admittedly, picking a startup as a bank increases that risk somewhat, but so does picking a startup to provide your CRM system or web platform or other mission critical stuff that's a lot more likely to be shut down with minimal warning, or indeed choosing to raise funding from a VC that wants you to 20x or bust...

> You think the CEO of a 100 person startup should be worried about something like a bank run happening?

Yes. Not specifically a bank run, but bank failure. Cash is the lifeblood of a company. Let's not worry about our cash becoming unavailable, in a bank that buys risky assets with our cash, in a perilous interest rates environment, "cuz it's not 1920."

  You think the CEO of a 100 person startup should be worried about something like a bank run happening?

Yes. A CEO should know where the money is, what the risks are, and how to handle them.

I'm just some jackass that knows about FDIC limits and how they (used to) work, and I'm as far from a CEO as I can be. I absolutely expect CEOs to be thinking about this stuff.

Just wow. "Money Saving Expert", a UK website which gives pretty decent advice for the average person in the UK mentions the government provided insurance limit for deposit accounts (£85,000). Anyone reading that site knows their money could be lost if they have more than the limit in any single bank (or multiple banks where a subsidiary shares the owner banks insurance).

But then again it doesn't really surprise me that an SV CEO would have no concept of deposit insurance. They live in a different world.

Does average person read the website?

If a CEO of 100 person startup can't understand the concept of business continuity planning, what are they doing, exactly?

I'm a nobody who got some startup lotto monies that were in excess of FDIC limits. You know what I did? I used multiple banks.

If you are not planning for "the big one," you are, again, accepting risk. My parents did not have earthquake insurance in SoCal in 1992 and had to start thinking about how they were going to repair the collapsed chimney on our house. I also didn't carry earthquake insurance on my SoCal house, knowing full well it is a risk. My mitigation being stocking up on food and water and having alternative sources of heat.

If you want your investments to be guaranteed by the US governent, that product exists (US Treasury bonds) and it is popular. The yields are pretty low though. People with megabucks to invest who put it in something other than treasuries do that because they chose to accept higher risks in order to chase higher returns. Except surprise, now the risk is socialized.

No, people with deposits in SVB never faced having it all disappear. SVB was insolvent which meant that its liabilities were larger than its assets. That doesn't mean the assets were worthless. The FDIC process is like a bankruptcy. First, everyone gets restored up to the $250K insurance limit. Next, the remaining assets are sold off and the proceeds are divvied up among the uninsured depositors. So the depositors take a haircut: some fraction goes poof and they get back the rest. They don't end up empty handed. Figures like 90% (i.e. they lose 10%) were being thrown around this morning, before the bailout.

Or perhaps “CEOs should hire a CFO”

Founders are often coming into new levels of financial responsibility when they get funded and as their business draws in later rounds of investment and customer revenue. You can’t assume $4M works the same way as $40k or your liable to lose a big chunk of it. Thankfully, there are professionals whose role is to help with that.

Or the VC companies that lent the money would pool resources and have one person handle a few smaller businesses using similar procedures to mitigate risk. Helping manage growth is part of what these companies are supposed to do and you'd think it would protect the investment (in a world where you thought the limit was actually $250k).

Oddly though, a thing I've heard repeated over and over is "it was in our covenant to use only SVC."

CEO's should read the god damn bank agreement. WTF.

How does "reading the bank agreement" improve anything? Every bank has the same exact risk.

No. Every bank does not impose the same risk.

Regional banks like SVB have different regulations than other banks.

So many people in all these threads that are doing the Monday morning quarterback of startup founders and believing that they would have done things differently if only THEY had been the CEO.

Obviously the #1 top priority of the CEO of an early stage startup is to spend time assessing and countering risks such as bank runs, gross mismanagement at their bank, earthquakes

This is reducto ad absurdum. The kind of risk management that would have saved startups here is basic, elementary business. Parking money at treasurydirect, firms that handle this kind of thing as a service.

If this leads to bailout then does it mean that taxpayers are effectively responsible for the CEOs decisions?

If they are not, then it's 250k left from every account and all else is lost. And someone could be sued for that. Who should it be if not CEOs?

The $250k coverage (per depositor) is also funded by taxpayers, right?

No, the FDIC is an insurance pool funded by its member banks.

That is the standard as defined by law and to which all directors sign up to.

If you can't live up to that responsibility don't run a company.

You don't have to be anywhere close to "omniscient" to understand the concepts of risk and insurance. Every layman knows about FDIC limits. In addition, these CEOs are backed and advised by resourceful VCs. Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash. Hubris or incompetence or both.

> Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash.

Worse, according to others in the thread they had it in the contract that they must use SVB exclusively.

It's an impossible standard to hold founders to know that deposits are insured up to $250,000? This isn't exactly fine print. Just be minimally competent and not a clown.

What were the risky bets?

This is a very weird blame shift. At 250k/account insured suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks?

Or just put into T-Bills, which private individuals can do from their phones.

Or pay someone/some company to do it.

You pay for AWS because you don’t feel like managing hardware, why just assume you can manage 10s of millions of dollars?

Except people that owned T-Bills that they bought through SVB also lost access to their money.

Should they buy the T-Bills and hold the actual certificates under their mattress?

> Except people that owned T-Bills that they bought through SVB also lost access to their money.

I don't think that's the case, though I may be wrong and would appreciate correction if so. Anyone who held T-Bills at SVB as a broker should have been able to transfer them to another broker at no loss (but at a small delay), and the remaining $250k in their checking account should have been available within one business day.

No whether you have $1 in the bank or $100 million is irrelevant.

Your job is to understand and mitigate financial risk as is required by law.

And in this case there are many options for managing this risk other than splitting it up manually into multiple bank accounts. Speaking with a financial advisor would help with this.

There’s so much victim blaming in this comments section. I’m amazed.

The real victims in all of this are the taxpayers who will cover the costs.

CEOs who should have known better are not victims.

Taxpayers are not covering any cost. The banks will pay for it via potentially higher FDIC insurance premiums. It’s possible they pass that on to customers, but there’s no direct link here.

Um, yes? If you have several million dollars of deposits you should absolutely split them among a series of banks as well as money market funds. This is why you need to find a competent banker who can give you sound financial advice.

You don't need 16 banks to eliminate all risk. You need one bank and a treasurydirect account.

Anybody, including corporations and partnerships, can safely park excess cash at treasurydirect.gov. Buy short term treasuries and time the redemptions to coincide with next month's payrolls. The shortest bills are 4 weeks and they're paying like 4% right now.

I honestly don't understand why more people don't do it.

Treasurydirect is great and everything you say is true, but the poor user experience and the commonly reported difficulty involved in getting help if there is a problem make it more appropriate for personal finance than business, I would think.

More generally the approach of using a cash sweep account in conjunction with t-bills held with a custodian bank seems like pretty sane advice. I don't think I'd emphasize "one bank," but otherwise, sure.

lol @ the hackernews commentariat learning that the ideal CEO isn't just some ascendant version of a rockstar coder that makes gantt charts.

> suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks

Yes. There's no "suddenly" to it - you're describing well-established fiduciary responsibilities. A CEO's responsibility is to delegate those tasks to someone like a CFO, who _absolutely should_ incorporate a strategy that balances liquidity with stability. The CFO also has a responsibility to see just what, exactly, a bank is doing with their deposits and make a determination about the associated risk. And yes, it is very normal to park money in various accounts and instruments as part of that strategy.

It is deeply distressing that half the comments here and abroad think this is some absurd, unattainable standard instead of the operative norm for the other 90% of the economy that doesn't get treated like a miracle baby for simply existing. You're not running a lemonade stand, and witnessing self-anointed "innovators" screech for a bailout because they somehow accrued millions of dollars in investments without ever learning about private deposit insurance or Cash Sweep or T-bills goes a long way to explaining why the majority of these goofs fashioned their Twitter bios into graveyards for failed ventures.

Look, I get that in hindsight the "of course you should do this thing that historically you would never think of" thing makes sense, but my bigger point was the blame shifting.

Sub-20 person startup CEOs didn't cause this problem. Saying "this is YOUR fault, person who just got their first seed round" seems to gloss over the large(r) issues.

No it’s the CEOs job to hire people who know like a CFO and everyone else in finance. Lots of companies make short investments with extra cash. No need to put everything in a single bank account.

Why would we want a situation where everyone splits up their cash into $250k accounts? Seems like that would waste a lot of time while removing competition (who cares what the bank is, any bank is fine for $250k). And it wouldn't ultimately save taxpayers any money, it's just a strategy for gaming the current FDIC guarantee.

You don't need to limit your accounts to a maximum of $250k. You just need to use more than one bank if you're going to use a regional bank like SVB.

Especially a regional bank like SVB that fought hard against regulation, caters specifically to herd-thinking VCs and startups, offered 4.5% APY, and went all in on mortgage backed securities shortly before the Fed hiked rates way up.

> suddenly it's a CEOs fiduciary incompetence that a seed round isn't distributed amongst 16 banks?

That's not your only option and this is nothing new. Even I - arguably a very small business owner - spread my risk. Just in case...

So what exactly is a CEOs responsibility then? I feel like people are increasingly just removing any and all blame from CEOs for mismanaging their companies. Why should they even exist if they have zero responsibilities?

Idea guy? ;)

And here it starts.. Lots of prominent people have just been exposed by this whole fiasco. 100% truly exposed and they're not gonna like it.

They're gonna want to try to rebuild their reputations. What's coming is a lot of "who are you gonna trust me or your lying eyes?". Starting soon you're gonna hear all the sob stories about how the VCs all this wonderful all did X and Y and Z. And nothing we just saw really mattered. And downplaying how as soon as the going got tough they abandoned all of their SV ethos and immediately went begging to the government to be bailed out.

Be prepared because there will be a huge PR push soon like you haven't seen.

Start collecting all the evidence that shows how bad these people acted before it disappears into the ether and prepare rebuttals that you can copypasta on Reddit, Twitter and wherever else they post their PR garbage...

Could you post some example? I'm out of the loop. Who did what?

Start at David Sacks and Bill Ackman twitter accounts. Add some Jason Calacanis and baby you’ve got a stew going.

Hurry I’m sure they are deleting as we speak.

https://twitter.com/BillAckman/status/1634564398919368704

https://twitter.com/DavidSacks/status/1634382260433719298

https://twitter.com/Jason/status/1634792355294515200

> @Jason

>YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW — THAT IS THE PROPER REACTION TO A BANK RUN & CONTAGION

>@POTUS & @SecYellen MUST GET ON TV TOMORROW AND GUARANTEE ALL DEPOSITS UP TO $10M OR THIS WILL SPIRAL INTO CHAOS

This is one of the most irresponsible things I’ve ever seen tweeted. It’s the equivalent of screaming fire in a crowded theater.

David Sacks spent the weekend advocating for the exact action that Janet Yellen just took. What's the problem with that?

Sorry, how is this irresponsible? Leaders that imagine and vocally describe a plausible negative outcome seems quite sensible.

Seems the equivalent of screaming fire in a crowded theater, when there is an actual fire.

Bank runs are a psychological phenomenon.

If you're looking at a bunch of companies you're invested in taking a 5, 10, whatever percent haircut on their deposits, it might be to your interest to take to the media and encourage everyone to panic, helping to create the very risk of contagion that you're talking about, to try to force the government's hand.

No, this has the power to cause the fire to get much larger because the shout gets heard way outside the theater.

They are using their media influence to "threaten" a bank run. Aka, if you don't bail us out, then we might as well take the whole system with us.

> A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll.

Because they have duty to do so, as (part) owners of those companies. They could face personal liability for being negligent enough. You'd think any company with non-trivial payroll should've known better than not to hedge on all the things, including their banking partner.

This is inaccurate. In no way did people have to turn to their personal finances to help companies that their company invested in. That is like your banker, seeing your dire situation caused by a third party to you, and writing you a personal check… That is actually what happened across multiple situations I witnessed. Not saying these folks are saints but pretty unexpected to see.

Board members have personal liability for payroll in California.

This is incorrect. Payroll pierces the corporate veil.

Not necessarily for investors, unless it can be shown that they have incurred liability beyond their investment.

Many investors like to have a board seat, which makes them an officer of the company

True, but getting a board to be liable has a very high standard of proof. If not then there wouldn't be any boards, the compensation would not outweigh the risks.

Given the choice between bridging some cash (knowing that the full faith and credit of the US government backs the funds being bridged), or having the possibility of getting dragged into proceedings in the future, which at best would increase my liability insurance premiums, I'd pick the former.

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

I mean, having all your data randomly disappear isn't one of the risks that anyone should have to take. But if a company suffered systems failure without backups, what would we be saying? If a company had a breach and all their data got release or encrypted by ransomware attackers, would people seriously be arguing for a taxpayer-funded government bailout?

> A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll.

Source? Who specifically, how much and can you independently verify that they actually did it?

A lot of prominent VCs were also screaming their heads off that other banks were about to fail.

These people played a zero-sum game, purposefully generating as much panic as possible to force the fed to act.

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

The fed has sat on its hands for decades and done nothing to mandate better protection for ACH transactions, done nothing to mandate phasing ou magstripe transactions (Europe has been on chip and pin for decades), our check cashing system is a complete mess in ways scammers take advantage of, and debit cards have a fraction of the protection credit cards do despite "real money" being involved instead of credit.

But then a bunch of billionaires force hundreds of companies to do business with just one bank, that bank is outright incompetent in how it manages its funds and employed people who were central in the last financial crisis, and suddenly it's "well, we must act to protect confidence in the banking system"?

I have zero confidence in the banking system. My money doesn't feel remotely safe from being stolen. I can't even find a bank that will do hardware 2FA instead of SMS 2FA, which is worse than not having it at all.

What is jpow doing about that?

"Having your bank account randomly disappear isn't one of the risks that anyone should have to take." Companies actually do. That's why they keep their assets as cash at a minimum and typically don't concentrate that cash in one institution. Risk management is a big part of institutional financial management. This isn't the first bank failure and this isn't going to be the last. This situation will, however, probably make bank bail outs less likely in the future. The political fall out will be huge. 100% this is a big point in the 2024 election. (Having a bank named Silicon Valley Bank collapse couldn't be a better metaphor).

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

Not only is it a risk many take, but many end up losing a significant amount. The FDIC actually has a list of the numerous failed banks they've helped depositors recover assets from here[1]. You can see that depositors often lose a lot when banks fail.

Now I don't think this is a good thing, and I think it would be worthwhile to have a conversation about a systemic way to avoid this. But it was eye-opening to see so many not advocating any systemic approach, and instead just saying "the government should do whatever it can to cover all SVB loses because people like us are special."

[1] https://closedbanks.fdic.gov/dividends/

Startup founders are very sophisticated. Perhaps they were aware of the risks SVB was taking with their money?

"Equity is when you take risks, except for the risks you didn't anticipate"

Absurd take.

>Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

This bank choose to _avoid_ safety regulations from the 2008 financial crisis, which is completely open information. They used this avoidance to pursue greater risk.

What is "randomly disappear" about putting your money into such a bank?

The thing I'm most confused about in this comment is that you ever believed that VC's and startups were some kind of noble class.

I believed that VCs and startups were mostly good people trying to do the right thing.

But what we've seen in the last few days is utterly despicable behaviour by many of the leading figures driven solely by greed and self-interest.

I think increasingly startups will look to bootstrap in the coming years.

> I believed that VCs and startups were mostly good people trying to do the right thing.

I have not seen one human being that didn't turn around because of greed.

We are all vulnerable

These aren't children. They are grown adults many in the later years of their life.

Nobody is changing their stripes.

I imagine you are not looking too hard. I have met many people who have dedicated their life to service and not greed. Richard Stillman is one if you need an example.

It takes a hobbit.

Most people are driven by greed and self interest. Especially VC and Startups, otherwise why did they join the business?

Literally the whole point of a startup is to make a lot of money?

Absolutely - because otherwise the risk to take them on is too high in all measurable terms (time, lost time, lost opportunity, lost capital, emotional toil)

Unfortunately the finance industry has perverted the purpose of startups and companies as a whole. While it is the way currently, it wasn’t until the past 15 years or so. It used to be you solved a problem or met a need. You made money because of this. It makes me sick that companies’ sole purpose now is to enrich shareholders.

Not for many of us. I work in medtech, medical devices specifically. For me it's about bringing new medical treatments to market and therefore to be able to help people with those new devices. Large intrenched medical device manufacturers cannot innovate, they don't know how, so the only way to really innovate AMF bring new medical devices to market is through thr startup pathway.

What is the “utterly despicable behaviour”? Startups trying to protect their investor’s assets? Banks trying to secure low risk long-term returns? Clearly they should have hedged, but is this really a moral failure?

I think of people like David Sacks preaching libertarianism and not taking money from the government until the moment things seemed uncertain at which point he’s practically begging for government bail out.

I think given his influence and hypocrisy this is despicable. But pathetic is another word that comes to mind.

I think people are unhappy about the hypocrisy in the form of a special carve out. This class of people, despite their wealth and influence, aren't exactly lobbying for expansion of similar protections for the average person. In fact, who's to say if a lot of these startups weren't just laying off people as part of the crowd recently? So people are mad of the unfairness.

How is it a special carve out? The FDIC protects literally all the other deposits already.

They quite literally made exceptions for SVB and Signature only.

And all the average persons the OP mentioned were already protected. We’ll see if this stops the contagion. It’s in our collective interest that it does.

Yes, it's a moral failure. Fiduciary duty is often poorly-remunerated and boring. If you can't tolerate that, don't become a fiduciary.

The "changing the world" talk is just as hollow as corporate business talk. Just a way to talk about what you're doing without specifically mentioning that "we're doing this to get more money", which is the actual reason anyone ever does anything.

Some founders/investors believe their own BS because that's what a good salesman does.

Being practical and sugar coating words has been the way to do business forever. The startup speak is just a specific flavor of words that's popular in a region/culture now, is representative of the business culture to some degree, but is just as hollow as any pleasantry.

> Just a way to talk about what you're doing without specifically mentioning that "we're doing this to get more money", which is the actual reason anyone ever does anything.

blanket statement, also bullshit. Of course money is a driver, but if that's your only driver as an entrepreneur then you're likely not going to be very successful. In fact, this is the primary difference between VCs and builders.

Fine, humans are multifaceted creatures and some business owners do actually care about making a change in their market in a positive way. The moment you choose to start a private for-profit business however, you're still forced to optimize your business decisions to favor your own economic growth -- that will end up being the major driving factor behind most decisions. Few people let ideology come between them and large sums of cash.

  > The "changing the world" talk is just as hollow as corporate business talk.

The changing the world talk is just corporate business talk.

Why bootstrap? The VCs came through for their companies here. They got the government to change course. Many told their startups ahead of time to pull cash from a failing bank.

> Many told their startups ahead of time to pull cash from a failing bank.

Still pissed about that. It was the proximate cause of the bank run.

Most good people trying to do the right thing eventually reach the conclusion that they should leave the tech/startup scene altogether. There are so many problems in the tech world that we only overlook them because we have a stake in it.

> I believed that VCs and startups were mostly good people trying to do the right thing.

I'm sure a lot of mortgage originators in 2006 thought they were doing the right thing by getting risky people into houses before prices rocketed into the stratosphere, because, you know, home values never go down.

VCs have always been money managers looking to make a big return on their existing capital. No part of that has ever included being a good person or trying to do the right thing.

It's convenient for tech companies that VC investment strategy involves giving seed money to some startups, but it comes at a price of the VCs having some say over company decisions and a high percentage of ownership (and therefore eventual value).

I used to believe it until about 7 years ago, when I started to build an open source alternative to the rentseeking Big Tech industry. Too much of Web2 and Web3 was based around the profit motive, and no one stuck around long enough to replicate their stack and give it to the people:

https://github.com/Qbix/Platform

https://github.com/Intercoin

I believe in gift economies (science, wikipedia, open source) being superior to capitalism and private ownership of platforms.

Instead of Zuck, Elon and Bezos we could use more Linus, TimBernereLee and Vitalik.

Not for nothing but literally every person you cited, good and bad, came from well off families who built that wealth via capitalism. We'd be better off fixing the wealth disparity and making it so there are more people with a safety net that allows them to engage in gift economies like the open source software world.

It is difficult to be charitable when you have to worry where your next meal comes from.

You're right. That's why I believe in UBI and Universal Health Insurance as well. I speak about this quite a bit, and build it too:

https://community.intercoin.app/t/new-ubi-movement-mayors-ci...

https://community.intercoin.app/t/fund-for-refugees

A lot of people employed by tech companies are paid by their companies to contribute to open source projects which the company uses, so the gift economy is still deeply tied with capitalism despite the appearance.

I think as long as they don‘t get entrenched (usually by regulatory moats that prevent disruption) these go hand in hand. Creating a novel product/service and generating product market fit is kind if like science. Even if they get rich from it, now the whole world knows forever that this is a particular way to create value. As long as it is not driven by subsidies or caters other government linked industries that could skew/bias the value signal the demonstration as well as the offering of these goods and services is a net good imo

Most people that I have come across who are not experienced in tech startups seem to have some kind of holy image of VCs. They seem to think they're all "rich and successful". They think it is some kind of highly esteemed job to possess. Contrastingly, people who have been in the startup game for years know that VCs are just salespeople, and a great majority of them lose other peoples' money while just raking in a normal salary.

That's how VCs and certain founders have been portrayed by mass media and even on HN for many years.

And people don't question these portrayals? That's the surprising part.

A lot of being repeatedly told to take the most charitable interpretation of peoples words and action. Hoping that folks are more than their animal instincts.

Naive, eh?

When's the last time you saw a critical appraisal of any senior YC people on this forum? For a long time, Wilson, Andreesen and other marquee names in the VC world were treated with similar deference on HN.

Fawning media startup profiles and hagiographies are one of the reasons why Theranos, WeWork, and many smaller companies are able to thrive and even attract new investment and customers.

> When's the last time you saw a critical appraisal of any senior YC people on this forum?

There was a post a couple of months ago asking what's the secret behind Sam Altman's excellent aptitude when it comes to grifting. Those weren't the exact words, but that was the general attitude of the post. But that post was part of the few exceptions that confirm the rule.

Found the post [1]

[1] https://news.ycombinator.com/item?id=34471720

To be fair, we're on a forum that was originally called "Startup News," created by a billionaire venture capitalist and run by a startup incubator. People do question the SV narrative, but this is still the lobby where all the people who drink the Kool-Aid hang out.

When maia arson crimew's site got linked here, she put a notice on top of her airline database hacking article with some disparaging commentaries about HN. Sure it may be a bit harsh for some people but she has got a point. This place is not immune to groupthink but in fact may actually be worse than forums with more diverse topics.

I think anyone who watched Silicon Valley has a more nuanced view of the VC industry than is being asserted here. And U.S. media coverage of tech in recent years has been overwhelmingly negative.

That being said HN is one of the last great (mostly-)unmoderated forums on the internet. I personally think U.S. media has been almost unfairly negative about the whole thing.

Hey, there’s nothing wrong with the government protecting people when they lose everything due to circumstances beyond their control. I’m glad to see VCs finally fighting for their progressive ideals.

Not the OP and I hadn't put them in the noble class category, but until a few years ago I had truly believed that the innovation that was still coming out of the US (and out of the West more generally) was in no small part thanks to SV startups (and hence thanks to the VC industry supporting them).

The whole crypto fiasco plus a few other things (these SV people going from worshipping Musk to hating him in a very short period, for example) have convinced me that I was a holding a view that was not based on anything of substance.

Which begs the question: where does real innovation come from in the US (and the West more generally)? The SV start-ups are not providing it, ditto for the FAANGs, what's left?

> where does real innovation come from in the US (and the West more generally)?

Chinese-style surveillance tech, unironically. The next great experiment after social media is the increasing use of tech to control people with an personalized granularity that free-market capitalism (or even MMT) could never dream to achieve.

In other words, the plot of MGS2.

For obvious reasons all this is unpopular here. But regardless of feelings, it is the next logical step.

> Chinese-style surveillance tech, unironically

Yeah, now that you mention it the one thing at which AI is really good at is image recognition.

There was this drone video [1] of a busy intersection posted on my country's sub-reddit recently, and from second 0:11 or so the way that the software is able to "recognise" and assign an unique ID to each and every car from that intersection is very Minority Report-y. What's scarier is that this looks like consumer-level stuff, not some fancy state-run surveillance thingie.

I assume the drone is Chinese-made, most probably also the software that made that identification possible.

[1] https://old.reddit.com/r/Romania/comments/11p9o7w/intersec%C...

I cannot decide if the idea that VCs are some kind of kindhearted patrons and startups in general are all moral straight arrows dedicated to only good things is outright propaganda or just distilled Silicon Valley delusion. Hanlon's Razor indicates the latter, but I do wonder.

For every one company that genuinely is working out of the goodness of their hearts, there are 10 serial founders seeking to inveigle their way into something as a middleman, sorry "disruptor", then cash out and go round again before anyone notices the cracks.

> For every one company that genuinely is working out of the goodness of their hearts, there are 10 serial founders seeking to inveigle their way into something as a middleman, sorry "disruptor", then cash out and go round again before anyone notices the cracks.

Well said.

Agreed. This is what shocked me most. I have always thought VC = Vulture Capitalist.

Absolutely. People like Garry Tan, Sam Altman, Michael Seibel, Paul Graham, Mark Cuban, all pushed hard to keep their money, not caring if it's at taxpayer expense. Rich people tend to only care about helping others when it aligns with helping their own pockets.

This may have been the most prudent decision by the government, though it'll be hard to say what would've happened otherwise. But in the end, it sounds like the average person will still be negatively affected, by having small accounts under the $250k limit subsidize insurance for larger accounts.

Mark Cuban is a standup guy. Can speak from personal experience.

Rest of your comment, I mostly agree with though.

Wouldn't mind hearing your story!

But by default, I assume everyone, rich or poor, acts in a selfish manner. They'll help others only when it helps themselves, often by taking an insignificant financial hit for a substantial reputational bonus. Many rich people like the ones I listed try to act like their overall goal is to help others, but their actions seem to always align with furthering their own interests. If Mark Cuban did something that did substantial damage to his own overall value (financially or reputationally) in order to help someone unrelated, I'd be pleasantly surprised to hear it.

Short version: Mark realized a person needed help, even when those closest to that person didn’t realize. He went above & beyond to help that person, someone who he barely knew.

Note: cutting a check is easy. What’s hard, is to give someone non-monetary help. Because it means you have to actually be involved if it’s non-monetary. This was that type of help he gave.

I assume there's lots of private details you can't share, so I can't judge much. But fair, if that's true, it would be good.

It's not like rich people need to care about what I think, but I just argue that people should avoid glorifying them and believing claims that they want to help the world, as I've seen too many times that they are only interested in helping themselves. And the things I've seen Mark Cuban push for on Twitter are often pretty awful.

Should they not push for a good policy just because it benefits them? I don't really get the criticism, unless you think they were hiding the fact they had skin in the game.

I don't understand this comment. 1) SVB was not managed by VC's. 2) SVB went under because they bought US Treasuries, not because they took risky bets on startups.

VCs started a bank run by telling all their portfolio companies to pull out

That's just basic logic that anyone would follow to survive. VC's had nothing to do with SVB's bad money management.

They triggered the rush that exacerbate the downfall.

If nobody is rushing, SVB could probably find ways to sell something before it's too late.

I see it the other way around. The VCs started a panic. Name one other bank that could survive $42 billion in withdrawals in a single day. Other than Bank of Zimbabwe, obviously. Even Wells and JP Morgan would collapse under that strain. The VCs caused their own pain.

The panic was started by SVB, not VCs. Abstract this to any other bank and the reaction would have been the same.

No small or medium bank in the US can withstand a bank run

Yeah, but what are the specific cash amounts we are talking about?

Such extreme exposure to interest rate risk would've blown up in some other ways - say, a large client processing a routine payroll, executing stock buyback, or investing in an entity that banks elsewhere.

No. SVB price crashed 50% in one day and got downrated by Moodys, which exposed a bunch of red flags that would have resulted in a bank run regardless of what VCs said.

The stock crashed because of the initial pseudo bank run due to high interest rates on capital (at least that's the reason given for withdrawals), and the bank's subsequent failure to make up the difference after selling a treasuries portfolio. After which a real bank run occurred. Then the bank started down a path of a more desperate measure, and that's when they were shut down. At least that's what I got from an article.

VCs started a bank run because the bank they were using was insolvent.

That's not their fault. Would you keep your money in an insolvent bank?

I think they were solvent im the beginning of the week. But idk if it was just because they didn‘t have to mark their underwater investments to market

That’s a peculiar definition of “solvent”

It's the one banks and regulators use, though!

SVB had risks, VCs did what they should do to respond to said risk. Would you blame regular working class people in a retail bank run scenario for wanting to save their money from potential risk?

I believe they're referring to the bailout YC (and others) were asking for- going so far as to arrange a petition last night.

YC asked for exactly what just happened. (Depositors be made whole.) They did not ask for anything beyond what regulators ultimately deemed reasonable.

"I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty."

The point is that these VC's didn't act to support their investments, they flailed around begging for bailout (that they probably didn't need but they didn't understand banking well enough to know that or bother to consult any experts before making public statements).

They behaved badly and should be embarrassed and everyone should remember it.

...why? For asking for government intervention to protect the innocent and avoid contagion? Why should that be embarrassing?

VCs themselves could have fixed this problem (that they, in part, created) and some of them did but many did not.

Why should that be embarrassing?

Because they preached for years that regulation is bad, and the government shouldn't be involved in their financial affairs.

Then when something went wrong, they begged for a bailout from the very regulators they disdained: https://www.ycombinator.com/blog/urgent-sign-the-petition-no...

Why do you find it believable that they asked for government intervention to protect "the innocent" as opposed to simply acting to protect their own private financial interests, which seems to be the simplest explanation?

I'm not even convinced that the depositors made whole here were innocent--they accepted a known risk by exceeding the risk-free FDIC limit. The sad part is that in our society, we have no qualms about literally turning working people out into the street when they make financial missteps, but the already-wealthy receive prompt intervention from the highest levels to protect them and other wealthy people from the consequences of their investment decisions.

What argument is really left for this kind of intervention, besides appeals to the trickle-down system where the rich must be vigilantly protected since the rest of our society is set up to be disrupted when they fail. The whole system is morally and politically bankrupt.

> Why do you find it believable that they asked for government intervention to protect "the innocent" as opposed to simply acting to protect their own private financial interests

They are the innocent party here though (well, except for maybe Peter Thiel). The depositors didn't cause this problem.

This was an extremely obvious example of when the private sector could've collaborated to solve a problem. SVB was doing a capital raise just last week. Instead the VC community colluded to accelerate the problem and is now asking for a government bailout

They actually brewed up the contagion. Without the alarmism everyone would just assume that they get a 10-20% haircut and have most of their money back within a week

https://files.mastodon.social/media_attachments/files/110/01...

Being against student loan forgiveness or any sort of help to anyone, ever, but then running to mommy Yellen the second you get in trouble is just too hypocritical to believe.

If that's where you (philosophical you, not you personally) landed on those two issues, you can get fucked.

What innocent? They could have sold the uninsured deposits at a discount, made payroll, and let the equity eat the loss. Instead they went on an embarrassing bailout begging extravaganza and unfortunately succeeded. Nobody, ever, should take any of these people seriously again.

They begged for special dispensation that they didn't ever need. They proved themselves to be both selfish and ignorant and deserve any derision they receive.

wasn't it ultra low interest investments, but very long term? They should have known it wasn't going to stay like that after the crazy 2020 ride. :/

Yes, long-term treasuries which for years had been at very low interest rates. You're certainly right that they shouldn't have done that, but it doesn't invalidate GP's point.

My understanding is that it was in fact both:

1. If they had more short dated treasuries, they could have used them to fund drawdowns, and would not have had to sell their long dated treasuries, that went underwater as interest rates rise.

2. If they had not been overly exposed to one sector, a sector that largely existed due to 'free money' of zero interest rates, then large scale draw downs would not have happened as interest rates rise.

> 1) SVB was not managed by VC's.

I think this is very much in question. Silicon Valley Bank was absolutely part of a cohesive microeconomy. There's no other explanation for the absolutely uniformity with which all those startups were using it for what should have been 100% commodity banking services. Those startups all banked with SVB because their VCs told them to.

And the VCs told their startups to bank with SVB because... we don't know yet. But any time you have a signal this strong, there's a driver.

Add to that the fact that the moment all those startups seemed likely to lose banking services, however temporarily, those same VCs freaked the fuck out of their minds on twitter and started shrieking in all caps about the end of western capitalism. That's not mere concern for their poor startups (most of whom were going to fail anyway, after all -- they're startups!). These VCs were exposed to the SVB failure. They were leveraged somehow and about to get caught holding the bag.

There was some kind of insider dealing going on with SVB. It wasn't just a bank. We for sure know that much. Whether we have criminal fraud or not is an open question.

Bill Ackman publicly admitted on Twitter to be on the hook for at least 10% of his assets.

That most probably means, he and his companies kept his cash in SIVB and not that he has stake in it.

One element is that the banking industry as a whole behaves pretty chaotically with 'unusual' customers.

Big wire in from a fundraising round? Account frozen. Big wire out for an acquisition? Account frozen. Bank learns your customers include cryptocurrency companies? Account frozen. Bank account balance huge relative to your business' cashflow? Account frozen. Random bank staff doesn't understand what you're doing? Account frozen.

In that kind of climate its almost inevitable that VC's would recommend a single bank known to not behave erratically for the activities that are usual for their investments.

SVB made loans to cash-rich companies approximate to their funding rounds, when they were least likely to immediately use the cash. These loans typically required the company to hold the money as a deposit in SVB. These deposits were used to buy long duration bonds.

In other words, SVB used these companies to produce new money that they could earn interest on.

Yeah, that's the kind of thing I'm imagining. Though it doesn't explain the VC tweetpanic unless they were getting kickbacks. Is there a cite for that, or a story posted somewhere?

https://twitter.com/jonwu_/status/1634250770555219970

This a great point. Why did the VCs force startups to use SVB and not others for commodity banking ? Anyone know what SVB did and others couldn’t?

> not because they took risky bets on startups.

SVB regularly provides credit to risky startups, which is why they existed in the first place (because other banks wouldn't lend at those rates). So, yes, they sorta did place risky bets on startups.

Source for this? All evidence show that their failure at least started with them owning a lot of "safe" bonds, whose value declined with increasing fed rates.

https://www.svb.com/landing-pages/venture-debt

To elaborate further with hard numbers. See #2:

https://www.linkedin.com/posts/rich-falk-wallace_silicon-val...

#1: Mortgage backed securities: $82B (83% residential) #2: Direct loans: $74B (55% short term loans to VCs & PE) #3: Liquid assets: $55B

Joe Weisenthal (who is always worth listening too in matters of finance) put it well here: https://twitter.com/thestalwart/status/1634985524007157760?s...

Some VCs were definitely better than others: the very worse was probably the All In Crew who were trying to spread a bank run to tie the government's hand. Truly despicable.

saw their all in episode. definitely did not get signal you described.

The All In Crew are the kings of rent seekers. Chamath himself made billions off the SPAC boom which should tell you all you need to know about them.

Mr Libertarian himself David Sacks crying for govt intervention was hilarious. What a clown.

Yes, this and his Solana pump (and dump?) really showed his true face to a point where I have to start questioning his qualities as a capital allocator

Agreed, I‘m a big fan of the all in podcast but this really showed them (especially Sacks) from their worst side. They clearly pressured the regulators by saying that everyone who has more than the amount insured by the FDIC in their account at a regional bank is stupid and reckless if they don‘t transfer it to one of the top four banks on Monday. The situation at SVB seemed very manageable but even a small chance of this „mind virus“ spreading would be so devastating that they decided to backstop the situation.

> It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new.

Mm hmm. Yes, after all is said and done, the main take away from this is that startup employees and founders no longer deserve credit for taking risks and doing something new. Glad our priorities are straight here on hackernews.

The founders and employees deserve credit, the VCs not so much. They were the ones primarily driving the fearmongering.

The founders do need to wake up though.

If you don't understand the basics of the US banking system then not sure you should be running a business.

They don't have much agency in this. Go with a typical "small business account" meant for mom and pop shops at a bigger bank and you miss out on all the advantages of a more dynamic bank like SVB. Your investors would be asking questions. Collectively agree not to create a bank run, your investors would still ask questions.

Unless you are fully bootstrapped with no major cashflow issues, there are no right answers to this.

Oh, so they, wanting an advantage, made a choice that turned out to have some downsides as well? That sounds like a situation where they have plenty of agency to me. Especially when there are alternatives like putting their eggs in two baskets.

I bet you are one of those people who insist that companies making under 1mil ARR should support multiple auxiliary payment providers in the event you get your funds frozen by the Stripe/PayPal. The infrastructure providers need to do better, the burden should not be on small businesses to account for the cost of black swan structural failures. Words are cheap when you only work for well capitalized large corporations because your personal check book is rarely impacted aside from short term unemployment.

What?

The burden is not on small businesses. Most small businesses don't just have well over a quarter million dollars in cash just lying around collecting dust. And the few that do can open an account at second bank. It's not rocket surgery.

Beyond that, if they have the kind of cash flow where they need millions in cash sitting around, they should hire a finance professional. For many, many reasons, bank failure risk being a very small part of it.

> on all the advantages of a more dynamic bank like SVB

Then the CEOs/business owners going that way should fully ascertain and support the associated risks.

SVB doesn’t exactly go around publishing the details of their internal operations. Do you expect a small startup without significant ARR to question SVB’s treasury managers before opening an account?

No but their quarterly statements do have relevant information, if someone wants to dig around. One would assume that if people spend hundreds of thousands of dollars on AWS (someone to manage their compute), they would spend some time doing due-diligence on the financial institution where they choose to park their money.

What evidence is their that this due-diligence would conclude SVB was any more risky than a different bank? They bought US government bonds, this is not an FTX situation.

A prereq for running a business should be the ability to analyze and evaluate bank stability?

> For some sily reason I had some respect for the startup industry before this, now I see it as a joke.

1. silly reason

2. It's a joke

It looks like you just found your silly reason.

The greed of startups have evolved to become bigger and bigger as years pass by.

The romanticizing of startups came from propaganda. It's just that some of us were too young and naive to understand the puppetmaster while others had seen the puppeteer before...

> they no longer deserve credit for taking risks and doing something new

What on earth. Putting money in the bank was never a risk founders were lauded for, nor should it be on the titanic list of things they have to worry about.

We can brawl in the peanut gallery over FDIC limits and precedents and moral hazard (which lies with the banks, btw) but at the end of the day there can only be one “best country to start a startup” and whatever that is, it’s definitionally one where you don’t have to worry about getting rugged by the bank because someone you wouldn’t know from Adam made a bad bond trade.

VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment. I wouldn't be surprised if this forum harbors long term resentment, lack of respect, and a more adversarial relationship going forward. I haven't ever seen such a large lack of respect for them as the past couple days. This industry has gone full Wall St. The next generation of individualist, regulation-disruption startup founders will be reconsidering the YC club a bit more...

The post by Gary Tan on here yesterday was actually shocking for me.

Link?

I think it's this one: https://news.ycombinator.com/item?id=35114009

Would you mind to share the post?

Why?

Now that the bailout is done, I hope these guys stop tweeting for the sake of everyone’s sanity.

> VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment

Why? It should be other way round. They worked hard to make sure that payrolls are met and jobs are secure, that is my most important expectation from my management and investors.

There is nothing but economic interest. If you want to predict how any company, startup or not, will behave just look at how they make money. In 99% of the cases companies act according to their business model. It is that simple, there is nothing else. All the "we will make the world a better place" rhetoric and mission statements are just recruiting and PR BS.

What did VCs do wrong here? They warned of impending solvency problems at SVB and told founders to withdraw their money ASAP. And indeed, the bank failed the next day. The companies in trouble are those who didn't listen to the VCs.

VCs Group-A (who knew something) rushed the bank.

VCs Group-B to Z were too late so they asked Govt to help them.

It's not just founders who put their money there, VC funds are there as well and they are probably close to 100% uninsured (cause it's the Fund Series I - XXX).

If you get your hands on the list of depositors, you'll see the list of Funds Series from VCs.

Most VCs don’t keep a substantive amount of their dry powder on hand, just a percentage. When they need money they make a capital call to their LPs.

(At least, that’s as I understand it from the VCs that I know it)

Basically lobbying the government for a bailout so that their startup investments don't go to zero.

Part of the issue is a common one: assigning blame for actions taken by individuals to the collective. It’s a nasty internet trope. But these things are true:

- the crisis was at the most caused and at the least exacerbated to the point of no return by the advice that some firms gave

- the general zeitgeist amongst certain firms and from particular individuals in firms leaned towards libertarian ideology, which seemed to go out the window when ish hit the fan. I can really only find one prominent example of this, so I don’t know if it’s fair to paint all of VC-land with the same brush

- it is probably the case that there are members of firms in both group one and group two, which looks bad, because panicking at the last second looks bad, especially when your panic screws (for your own benefit) a business partner of decades who was essentially only in a risk zone because they chose to do business with you. That’s an oversimplification of course, but it all is

Everyone withdrawing their money ASAP is what caused the solvency problem. There's a big difference between warning people of a problem and encouraging them to behave in a way that creates it.

No bank could survive this kind of run. See https://en.wikipedia.org/wiki/Bank_run

They went around begging for bailouts when they could have just had the companies sell the uninsured deposit claims at a discount, paid their workers, and, as equity, eaten the loss.

Why should they not get credit for taking risks or doing something new? How is that related at all? The risks they take are based on the viability of their product. It was never (supposed to be) based on the risk of if their banking institution could provide them with their cash as needed. None of that has changed.

We’ll because taking risks by definition means you could end up in a negative situation and so it should be more of a personal decision?

It seems like SVB took a risk and lost.

If the majority of Americans voted for SVB taking higher risks it would be understandable but now who comes up with the missing money ? The government, which is tax payers who are already probably getting the raw end of the stick financially compare to silicon valleys.

I think this bailout will see a lot of political backlash.

>how prominent VCs behaved

How did they behave? Try to pull their money out of a failing bank?

I would too ...

Running to the Fed for help as soon as shit got real; made a lot of the bootstrapping libertarian ethos stereotypically espoused by a certain of VC seem very hollow.

Can't wait to start seeing their tweets railing about how unfair student debt relief is.

Deposit money in a bank and expect to be able to withdraw it later as agreed seems compatible with borrow money for education and expect to pay it back later as agreed.

They benefited with White Glove treatment and easy access to loans. They weren't depositing it there out of the goodness of their hearts. That's why SVB was hunting for yield.

When you deposit money at a bank, it is made very clear to you that only $250K is protected by the FDIC. Any more, and you either buy insurance for it or take a risk on losing it in a bank failure.

These depositors knew that and still acted irresponsibly, yet they are going to be made whole. It’s not that much different from taking out a loan you don’t understand.

Here here.

Luckily you don't have to wait, guys like jason were already making those sorts of comments

https://twitter.com/Jason/status/1561902763478396930 https://twitter.com/Jason/status/1561899007256866816

Court records also show he spent months last year making suggestions to Musk on how to engineer a sufficiently hostile environment to mass-sack Twitter staff while evading severance arrangements.

But sure, these guys are so concerned with the posibility of ordinary people getting hurt.

This is why Thiel was first, he can stick to his ideological guns. He also forced Silicon Valley valley to setup the massive bluff that they were too big to fail (and maybe they are indeed to big to fail) that the government refused to call.

So meat is back on the menu. No need for Ramen gents.

I’ve got no problem with people wanting their money out of a bank.

People like Jason Calcanis were screaming on Twitter like the world was going to collapse and that the contagion would take down regional banks hurting ordinary consumers.

All because he wanted the government to bail out his startups.

Did you miss the part of this press release where they announced that Signature Bank collapsed today? That makes it pretty clear that the contagion was real. Treasury’s actions make it abundantly clear as well.

There are 4,500+ commercial banks in the US with 70,000+ branches.

The idea that regional banks were going to collapse en masse because of the actions of one ineptly managed, highly unusual (in terms of customer and deposit mix) bank is ridiculous.

And trying to deliberately create a scare campaign so you can put political pressure on the FDIC to cover uninsured amounts is insidious and frankly evil.

Ok but did you really not address the fact that Signature Bank literally collapsed today? You know that is a different bank, correct? Did you see the stocks and sector ETFs for regional banks last week?

ETFs have weightings. SVB actually was a big portfolio piece for some ETFs. Especially because during COVID and the money printer boom, SVB stock went to the moon and hit $800 / share at one point.

I don't think ETFs are a good sign. One of my favorite bank ETFs, PGF is only down 6% on sentiment which isn't much.

One bank collapsing (because of crypto shenanigans, as I've read in another article) does not make for a contagion.

And you think Jason who-the-fuck-cares-about-what-he-thinks Calacanis somehow has a meaningful role in a scare campaign? He was just one of the scared people.

And guess what, the FDIC and the administration actually do believe there was a clear risk of regional banks going under. That's literally the topic of the article you're commenting under.

I feel this solution is too strong handed and I don't think the world would have ended if there wasn't a solution tomorrow and a hundred startups would have to take a 20-30% haircut on their raised funds by selling their claims, so I don't agree with Jason, but calling him evil for his standpoint and voicing it is what's ridiculous.

I see lots of screaming on twitter, I don't find this unusual or particularly bad.

Everyone would want their money back ...

But he was right? Certainly Yellen thought so. Why is screaming on twitter such a crime? Just block him.

> People like Jason Calcanis were screaming on Twitter like the world was going to collapse and that the contagion would take down regional banks hurting ordinary consumers.

If the 18th-largest bank in the country were to be allowed to collapse, with depositors losing money due to something they had no control over, why would any non-insane depositor keep their money in the 17th, or the 19th largest bank?

Any rational person will follow this line of reasoning to conclude that the only safe place to deposit your money would be a too-big-to-fail bank. And nobody wants to see that.

FDIC insures accounts to $250k. Why would any sane and rational person put more than $250k in any one account?

Because you don’t want a lot of accounts?

If SVB did fail with depositors not getting more than $250k back then it would be a contagion. I did find some VC tweets overly dramatic but the underlying messaging is still right.

Who would've thought post-hand-wringing-over-poor-300k-salary-tech-workers realizing their disposability that we would have another event reminding HN just how different the rules are for capital owners than the rest of us.

Why is that tech workers, many of whom easily have earned over a million dollars in salary over the past few years can't be told to "live within their means"?

Why is it that the same VCs that rallied against student debt relief think their poorly run bank should be bailed out?

I know why, this thread is chalk full of it. "We were smart, we were playing the game with the advantage we were told made us untouchable, we can't fathom gasp 'negative consequences' whatever those are".

I'm sick of it and thankful to see people seeing through this a bit more than usual. Downvoting isnt going to change a damn thing, click your hearts out and enjoy the dissonance. See ya in the next too-big-to-fail-as-a-result-of-unchecked-corporate-greed thread. lmao

Yes, regular people get their bank accounts automatically protected, and the capital owners had to sweat for a few days.

The bank is not bailed out, it's out of business, its shareholders get nothing, and its execs just lost their jobs. The bank's customers got bailed out.

How many startup employees do you believe are making 300k? That’s FAANG, big-tech companies that were in no way affected by SVB going under. If anything, startups are known for paying below market rate because they have tighter margins and compensate with the tenuous promise that more money might be made in the form of stock options if the company makes it big, which usually doesn’t pan out.

> Who would've thought post-hand-wringing-over-poor-300k-salary-tech-workers realizing their disposability that we would have another event reminding HN just how different the rules are for capital owners than the rest of us.

no offense this comment shows lack of even basic understanding of situation.

SVB collapse a zero impact on big tech workers earning $300k. this problem effect small business, maybe 50-75 employee who did not risk they money. they literally put in bank to do thing like pay employees and other bills.

start up employee is not earning $300k USD per year. start up hardly compete with big tech on any compensation. these people working hardest.. not rest and vest like big tech.

> I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke.

You have some serious disillusion.

the long term fallout was never going to come from only getting 90 cents on the dollar vs 100%

it’s the fact that the lender most willing to work with non traditional borrowers eg tech startups is now gone, and there’s no bank or lender that will replace them. if anything this will mean lending standards will tighten, and it will be very difficult for any customer with a SVB credit line to find another bank willing to lend to them on the same terms.

this is also coming at a time when more startups relied on debt to fund their companies because the equity raising environment is so tough, so now many founders might be forced to attempt to raise equity in a tech bear market on very bad terms if they can at all

Glorifying founders has always been stupid, they're all trying to get rich, not exactly a noble cause. It's not something to demonize them for either, but founder worship is kinda gross.

It's impossible to move on. There were insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme.

Now taxpayers are going to be footing the bill... It's a government-ordained transfer of wealth from good, honest taxpayers to whatever (possibly malicious) entities got that money.

It's theft. It's straight theft. Not even complicated. Theft is now legal depending on who you are.

It’s not strictly speaking taxpayers, it’s anyone with a bank account at a U.S. bank. But same effect.

> It's impossible to move on. There was insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme.

There was no theft. The bank bought bonds that decreased in value rapidly due to rising interest rates. Pure mismanagement, but not theft.

The bonds are good to yield on the stated timeframe. You need to hold them to maturity. They bought long term bonds and tried to sell them after newer higher yielding bonds came out. Bad decision. Also lobbying to avoid stress testing below 250B instead of 50B.

They could have kept deposits as cash and watched the value erode like a dumb retail consumer has an option to do. But that’d look bad for bank investors.

So now the Fed and Treasury are responsible for negative yield on bad bets if that account crosses 100B. Cool. I only have about 100B to go before the US government cares about my negative position. 401K takes an L because interest rate rises and the SP500 being a stock buyback circus. That’s on me I guess.

Anyone saying well it’s not using taxpayer dollars. Whatever, it is using our feds time. This whole thing is now J Powell and Yellen focusing on a cottage industry serving billionaire interests instead of using their time and agency to work for that dumb aforementioned retail consumer undergoing inflation and a pending recession.

In an agency where any intervention sets a precedent this is now telling regional banks to go ahead and yolo your balance sheet. We got you.

I want the startups to get their money through liquidation of the bank at whatever discount that comes to. 80c on the dollar, whatever it isn’t your money anyway it’s VC money. All savings accounts come with 250k FDIC insured. So play by those rules.

SVB shareholders have been wiped out in this, and the prospect of that fate should motivate banks to try to avoid a similar outcome for their institutions going forward.

It depends. It's likely that some of those big SVB shareholders were also shareholders of ventures which had deposits at SVB so they got punished and bailed out at the same time... Less punishment. Maybe even profitable for them.

They did pass tax on buybacks

Carried interest needs to be next

The whole business of a Bank is to manage interests and money. If a bank didn't consider interest rate and duration risks, it is such a gross mismanagement that it looks identical to theft. That is like a chef saying yeah we had best knife and utensils, we just didn't clean them and some mould was growing on them. On top of that is the suspicious sales of stock by CxOs.

An equally silly error would be concluding that all VCs are like this. Although we heard absolutely unhinged and insane panic from a few (like Jason Calacanis), and some milquetoast statements from others (Redpoint), we heard no panic from the largest players.

I won't reshare anecdotes here, but I heard stories over the weekend about intense and direct conversations between the largest VCs and the Fed.

By any chance were those largest players part of bank run on SVB?

[0] https://twitter.com/tomharari/status/1634577650856632321

You can probably infer who I'm talking about simply by noticing which major VCs were not part of the histrionic crowd.

VC insider types won this one in some sense but at the cost of some credibility (those most hysterically yelling om twitter at least)

I will never forget, they revealed their true faces. All these CEOs also. It's a big game, words are just tools to manipulate others into doing what you want them to do, nothing more.

They might as well be FAANG employees if they're so risk averse that they can't deal with such casual occurrences as their dang banks failing.

Does realizing this, that they were always like this change your perception of the last decade in any particular way?

I'm genuinely very curious. I've always considered them a bunch of smarmy opportunistic cutthroats, but that shift must be jarring right? Again I don't mean this negatively, genuinely interested in how it changes your understanding of the "startup era," pandemic, etc.

I learned that VCs are protective of their investments.

Which, as an investee, is exactly what I want.

Now they are going to see the light and give the employees the same "bailout" they got when times got tough in the form of "not getting laid off" right? .... Right? Because everyone deserves a break, right?

Just think of this moment as a great interview question during the next upcycle

i don't think there's going to be very much 'moving on', in fact i think alot of 'moving backwards' is about to happen

The people I lost respect for was a large portion of HN commenters calling on bank depositors - largely small businesses - to be snuffed out because there was a run on their bank. The comments have largely been factually wrong, misleading, and downright psychopathic. I am glad our government is not controlled by such people, but I question the value of this forum going forward given the large portion of it that is so incredibly toxic and so poorly informed.

All of these companies could have sold their uninsured deposits at a discount, made payroll, and let their equity holders take the loss. This is what equity holders are supposed to do. Instead they went on an embarrassing twitter begging campaign and unfortunately succeeded. The whole "workers missing mortgage payments" or "destroying a generation of innovation" is an insane, buck-passing take.

These are the same people that influenced most of the recent opinions around Google, Amazon, Meta, etc. I'm not saying everything is peachy keen at those companies, but just keep this in mind next time you see the next "Google eats babies" or similar un-nuanced headline and comments section.

why conflate "startups" with "VC"?

What are you on about?

The final decision was eminently reasonable.

The bank's shareholders are getting wiped out. The depositors are protected. Banks -- who depend on the continued faith of the public -- chip in a little more in insurance. The taxpayer pays nothing.

A bunch of software companies get to succeed or fail now on the basis of whether their business models and execution make any sense, as opposed to whether their bank bought enough interest-rate swaps.

Small regional banks can continue to exist. This will not necessitate even more consolidation in American capitalism. And there will be no follow-on bank runs to jeopardize grandma's CDs.

Seriously, what is there to complain about? The government did its job here. It governed. Fairly and competently.

> The taxpayer pays nothing.

Money to cover deposits that didn't previously didn't exist, suddenly exists, and there are people like you trying to tell everyone else that everything is rosy and that it's not going to cost the taxpayers anything.

It sounds like a revolutionary system that you're working with and if it truly costs "nothing", may I ask where I can sign up to have my bad financial investments refunded for free?

FDIC insurance is paid for by FDIC members (i.e., by banks), via an insurance premium. In this case, the FDIC is providing extra coverage, and charging member banks an extra assessment to pay for it. So the money comes from all the other banks.

"The taxpayer will pay for it" only in the sense that maybe member banks will try to pass this on in the form of fees.

"Bad financial investments" are almost 100% not being "refunded" to the bank shareholders. Their shares are, I assume, going to zero. The only way in which they are being protected -- the "almost" -- is in the fact that their shares go only to zero, and do not become liabilities.

Let us also consider what the investments were that went bad: Government bonds. So you could say that value flowed from the bank to "the taxpayer" (or to "the government") the minute those bonds lost value, i.e., the minute the Fed devalued them by hiking rates on newly-issued bonds. In that sense, the bank was already the bagholder for the Fed ("the taxpayer").

Why the scare quote on “founders”? It makes your comment come across as motivated.

You're going too far by calling VCs "rent seekers". They do provide value with other peoples' money to build companies. No matter how much people love to hate them, they are a necessary part of the startup ecosystem. Most of them fail and end up in tears in the long run -- it's just the nature of VC. There's no need to punch them when they're down.

in my personal opinion most if not all modern startups are seeking to create a system in which rent seeking behaviour is the end goal.

The stereotypical SV playbook is to enter a market, don't give a crap about the local regulation or laws, try to get big by using your cheap money to outstrip to competition and do rent-seeking when you are the largest.

Also, a lot of startups are solving non fundemental problems.

We should be spending all that engineering effort fixing things like climate change, food security for the global south and a way to deal with the aging population in the western world instead of thinking about algorithms to get more clicks on ads.

A few companies have done this but calling it the stereotypical playbook is a bit over the top.

Also, there are many startups building stupid junk to capture a piece of the pie but also many startups working on real problems.

This whole comment is a reductive cliche at this point.

Please start a company to work on fixing climate change, food security, aging, etc.

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