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In a slightly different reality…

“Sorry team, our main VC advised us to keep our money in SVB because it’s the right thing to do. We can’t make payroll. Our VC, true to their ideals, kept their cash in SVB too. They can’t help us. Kindly cast your blame on the thousands of startup peers that withdrew and remain unscathed. Their blatant self-interest may have killed us, but we are the true moral victors.”

Or in another

"How was your weekend?"

"Oh nice had a walk with the boys, saw a bald eagle"

We don't know that this would have been a crisis without a sudden 42 billion dollar withdrawal over 24 hours

I don't get that joke. Please, elaborate.

I'm pretty sure they mean that if the VCs hadn't advised companies to withdraw all at once, the crisis might never have happened, and March 11th might simply have been a nice day for a walk.

When the Moody's data became known it was going to happen one way or another. Well over 90% of the accounts were uninsured. Someone was going to pull money. Perfect unanimity in inaction was simply not possible. Given that scenario, it is a rational response to try and be first out the door.

The fault here is with SVB management making some very bad decisions and with VCs not looking at the publicly available data and moving away from SVB a lot sooner. Of course, hindsight is alway's 20/20. Once the Moody's trigger had happened the choices were simple.

The fault is also with VCs who mandated that portfolio companies concentrate large uninsured deposits in one bank, increasing the risk of a run. The bank to my knowledge didn’t even offer insured cash sweeps, a basic financial product for deposits above 250k.

There is a clip I saw on twitter as this was happening of Jason Calacanis bragging insufferably about his special treatment from SVB in obtaining quick and favorable terms for a private mortgage, likely thanks to the amount of business he and other investors brought the bank.

So no, I reject your claim that the same people that would design Class A shares to be inferior to Class B shares, then say “no takesy backseys!” when executing a hostile takeover of your company are not at fault here.

How can a discipline that prides itself in superior networking ability, information gathering, and prudent decision making not be at fault for pooling a stupid amount of wealth in the first bank to go broke post COVID bubble?

Yes. I agreed that the VCs are at fault for poor decisions relating to their use of SVB in the face of known issues with the bank. I also agree with your additional point that the initial concentration of uninsured funds in a single bank was also a bad idea.

i got that, but how does this relate to a bald eagle?

I don't think there's any symbolism there, the point is just that they did something that wasn't withdrawing 42 billion dollars.

VC and startups were facing a prisoner's dilemma, and they picked a viable strategy.

Defecting is only a good strategy in a prisoner's dilemma when you don't need to cooperate in the future and can't be punished outside the scenario of the prisoner's dilemma.

If this, say, destroys public trust in Silicon Valley startups, or leads to restrictive government regulation, then it might cost more than it saved in the long run.

no need for heroics, just don't "lie" about it by signing statements

> no need for heroics, just don't "lie" about it by signing statements

Have you read the statement? There is no "lie" in pulling money and signing the statement. Here is the text:

"The events that unfolded over the past 48 hours have been deeply disappointing and concerning. In the event that SVB were to be purchased and appropriately capitalized, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them."

The statement clearly communicates that they have ended their banking relationship (pulled their money). They are simply stating that if the finances of the bank are straightened out they will start banking there again. I don't see any disconnect or deceit between pulling their money and signing the statement. When the Moody's data came out and it was clear things were headed south, of course they transferred or at least tried to transfer their money out.

The failure of all of these financially savvy VCs was not pulling their money weeks or months ago. The data was all there as others have pointed out. They have all been whistling past the graveyard hoping the problem would go away. If there is any shame, it is in that failure to act earlier.

Agree completely with your point. Moving their funds from the train wreck was smart.

Shaming those that withdrew their funds reminds me of meme stock culture where participants shame sellers and make holding “no matter what” the highest virtue. The suckers that listen to that bullshit are the bag holding losers.

Well if everyone didn't just follow everyone else blindly, there wouldn't have been a run

How is pulling money out of an insolvent bank "blindly following?" Everyone could see their deposits were decreasing for over a year and they didn't have the cash to continue to support it, there's nothing blind about following the incentives and making a good decision.

Weren't they technically ok before the run as long as there wasn't a run?

If deposits kept increasing they might've been ok, but startups had been withdrawing the cash they had raised during the pandemic, deposits were decreasing rapidly before the solvency issues were thought about. At that point there is a very real scenario where the bank runs out of money and depositors are screwed.

I feel like if it were slower though, then the bank would have been fine.

Granted, I can't talk about the board or their investing decisions because I don't feel educated enough to speak on that part.

There's no way to "feel" this, if you can look at items on their balance sheet you can determine whether their assets at fair value covers their outstanding debt of not. IF it doesn't, it's likely the bank would break sooner or later, if there was no bank run, it would have died a slow and painful death anyway (or, more likely, somebody would try to make risky bets in attempt to recover).

There hasn't been a buyer yet, which indicates the perhaps the assets aren't that great.

> when they could have potentially lost it all if the government didn't step in and make an unprecedented promise to honor the deposits

Was this unprecedented? I thought the US government has always covered depositors in full beyond the $250k.

Sometimes they've been able to make all the depositors while by wiping out all the investors and selling all the assets (buildings, office chairs, etc.)

What was unprecedented this time was the promise that they'd do it regardless of whether or not they could recover enough assets.

When Washington Mutual and IndyMac collapsed in 2008, some depositors indeed never got all their money back from their uninsured accounts.

One big difference was that those banks were knowingly engaging in hugely risky schemes, while SVB was ultimately burned by making overly conservative investments.

The government could make that promise because they have the power to tax, i.e. they have the guns.

https://www.federalreserve.gov/newsevents/pressreleases/mone...

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

Now you may argue it is unfair to other banks to penalize them for the failings of a few. What the SVB fiasco showed is that systemic risk is not just in the too big to fail institutions, but also ones like SVB that are important to specific sectors of the economy, like SVB for Tech or GMAC for cars. As it turns out, SVB had recently gotten TBTF and started the risk management compliance process, including the so-called "living will" to give the Feds a roadmap for an orderly wind-down of the bank, which must have been well-thumbed over the weekend. I expect one of the consequences of this is that more banks will be subject to oversight.

> while SVB was ultimately burned by making overly conservative investments.

This isn't true, interest rates risk of securities of long duration (especially when current fed interest rate is zero) is well known to be risky by anyone who has a cursory understanding of the matter.