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Ask HN: How is the SVB situation affecting your startup?

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Re: Ask HN: How is the SVB situation affecting your startup?

#11

Post by lolinder »

tommoor wrote: post #8
lolinder wrote: post #5

> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarifie…

VC's are generally the ones that actively promoted SVB to their investments. There's literally a branch on Sandhill road.

By investors I'm not talking about venture capitalists, I'm talking about the stock market. I'm just surprised that people are just now realizing how bad it is to have the lion's share of Silicon Valley's financial resources centralized in one institution that doesn't have much in the way of other business.

Re: Ask HN: How is the SVB situation affecting your startup?

#12

Post by PaulHoule »

hugs wrote: post #4

No plans to move money out. But definite plans to create a new, additional account elsewhere and when payment for current orders in process comes in over the next 30 to 60 days, have those new funds go into the new account. (Basically, diversifying is good, and I shoulda/woulda/coulda done it sooner, but it was never my top priority... until now.)

Odds are the San Francisco Fed has been working overtime since last night and announce SVB is bought out by another bank this weekend.

Re: Ask HN: How is the SVB situation affecting your startup?

#13

Post by eqmvii »

CNBC (live TV) is reporting efforts to raise capital have failed and deposits are fleeing faster than talks about a sale are proceeding. Lots of reports that its online banking systems are "down" or suspended.

IMO there's a very good chance the bank enters FDIC receivership by Monday, and there may not be room to maneuver much anymore.

Edit 10:05 am eastern: David Faber live on CNBC says he's hearing deposits are flowing out too quickly for a sale to be negotiated. Quote: "That may "set up something else" over the weekend"

Re: Ask HN: How is the SVB situation affecting your startup?

#14

Post by gizmo »

lolinder wrote: post #5

> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarifie…

It was a major red flag! You're right about their liabilities, but their assets are mostly longish duration bonds. When interest rates go up their main customer base (startups) will have a harder time raising money (bad for them) and the value of their bonds will go down (because new bonds offer more interest). And now they're forced to sell these bonds at a loss to cover the money outflow (customers leaving). They're deep in the hole with no way out.

Basically SVB failed basic risk management, and they deserve to go down. You can't promise your customers they can take their money out at any time and then turn around and invest that money in longer duration assets you can't liquidate. Just irresponsible.

Execs selling millions worth of shares in the past weeks is also classy.

Re: Ask HN: How is the SVB situation affecting your startup?

#16

Post by lolinder »

kasey_junk wrote: post #10
lolinder wrote: post #5

> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarifie…

SVB has an extremely low loan to deposit ratio (~.45). Most of their assets are in the form of treasuries, bonds, etc. Depositor concentration is definitely high but that’s not particularly uncommon in banks (though for one of this size it is). But that concentration is what fueled their growth as well.

> Most of their assets are in the form of treasuries, bonds, etc.

I believe you know what you're talking about, but if that's the case why are they struggling to raise capital to pay depositors?

(I'm asking as an ignorant outsider to banking in general and SVB in particular.)

Re: Ask HN: How is the SVB situation affecting your startup?

#17

Post by welder »

danpalmer wrote: post #3

Stripe Atlas has supported SVB accounts for a while. I believe it may have been the only bank account supported at the beginning, but regardless, I suspect there are a lot of Atlas companies backed by SVB accounts.

Only for C-Corps, LLCs created with Atlas never used SVB.

Re: Ask HN: How is the SVB situation affecting your startup?

#18

Post by karpierz »

lolinder wrote: post #5

> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarifie…

The issue is not that SVB has loaned too much to companies that can't pay it back.

The issue is that SVB took in a lot of deposits in 2021-2022, and locked them into 10 year bonds at 2.5% interest. Now in 2023, a lot of their customers are burning money (withdrawing funds) and aren't raising money (depositing funds), and so they need to start liquidating the 10 year bonds.

The issue is that the 2021 bonds are discounted because interest rates have grown since, and they're out some money unless they can hold the bonds to maturity. So they're raising money to bridge the deficit to allow themselves to hold more of the bonds.

Re: Ask HN: How is the SVB situation affecting your startup?

#19

Post by raesene9 »

hkhanna wrote: post #2

Personally, I don't think there's a real problem unless everyone panics. Banks are well-regulated and stable and have been for decades. That said, my investors & cofounder have both expressed gratitude that our startup banks with Mercury and not SVB.

Whilst banks may have lots of regulations (depending on their country of operation), banks do fail reasonably regularly. For example this list of US bank failures https://en.wikipedia.org/wiki/List_of_largest_U.S._bank_fail...

Re: Ask HN: How is the SVB situation affecting your startup?

#20

Post by eqmvii »

PaulHoule wrote: post #12
hugs wrote: post #4

No plans to move money out. But definite plans to create a new, additional account elsewhere and when payment for current orders in process comes in over the next 30 to 60 days, have those new funds go into the new account. (Basically, diversifying is good, and I shoulda/woulda/coulda done it sooner, but it was never my top priority... until now.)

Odds are the San Francisco Fed has been working overtime since last night and announce SVB is bought out by another bank this weekend.

CNBC this morning has had a few chirons implying private capitalization/sales talks have failed

edit: maybe just the raise, and sales talks continue? https://www.cnbc.com/2023/03/10/silicon-valley-bank-financia...

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