> 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"
This is an impossible standard to hold founders of 10-100 person startups to. Might as well say "CEOs should be omniscient"
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.
Worse, according to others in the thread they had it in the contract that they must use SVB exclusively.
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.
Oddly though, a thing I've heard repeated over and over is "it was in our covenant to use only SVC."
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.
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.
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.
Of those who do, I wonder what percentage would be worried about that risk?
Maybe more than 50%? 75%? 80%?
A startup CEO isn’t going to be an expert in everything, no matter how much some people worship them.
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? :)
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.
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...
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?
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.
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 can't live up to that responsibility don't run a company.
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?