I don’t understand how VC funds can be in the billions and yet outsiders must assume they do not know anything about: 1. bank failures in the US in the last 100 years 2. deposits being on a bank’s balance sheet, hence the terms credit and debit cards 3. creditor subordination in event of default

Believing #3 especially makes no sense to me given the liquidity preference clauses I hear VCs have been writing into investment agreements with startups over the last few years.

These two realities, naive depositor and liquidity preferenced multi-billion dollar VCs, do not square up in my head.

FDIC protects naive depositors, not sophisticated financial professionals entrusted with billions of dollars of investment funds.