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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?

#51

Post by lotsofpulp »

orangepurple wrote: post #31
lordnacho wrote: post #26

Earlier quoted context omitted.

What doesn't seem to be so explicitly stated is that due to rates going up, the bonds are worth less than they were when rates were high. So they wouldn't have enough money if they turned the bonds into money. Guy lends you 100 at 3%, you buy 100 of bonds than pay you 5%. Guy asks for his money back, your bonds are worth only 80, big problem.

One of the biggest banks in the world failed to account for a capital management risk scenario where interest rates go up? Insane

Silicon Valley Bank was nowhere near one of the biggest banks in the world.

https://en.wikipedia.org/wiki/List_of_largest_banks

Not even amongst the largest banks in the US:

https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_U...

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

#52

Post by rr808 »

NickC25 wrote: post #34

I own put options that I bought yesterday at market open. It's not affecting my startup, but it's affecting my portfolio and I'm not happy that I can't sell those options.

Ring your broker. You can probably still execute the puts and you'll be short.

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

#53

Post by dahdum »

lolinder wrote: post #11
tommoor wrote: post #8

Earlier quoted context omitted.

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.

Their success is due to their tight focus though isn’t it? They’ve been around for 40 years and deeply entrenched in the VC ecosystem.

I am very curious whether their poor risk management is new, or if they’ve been playing fast and loose for much longer and only blowing up now.

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

#54

Post by blitzar »

orangepurple wrote: post #31
lordnacho wrote: post #26

Earlier quoted context omitted.

What doesn't seem to be so explicitly stated is that due to rates going up, the bonds are worth less than they were when rates were high. So they wouldn't have enough money if they turned the bonds into money. Guy lends you 100 at 3%, you buy 100 of bonds than pay you 5%. Guy asks for his money back, your bonds are worth only 80, big problem.

One of the biggest banks in the world failed to account for a capital management risk scenario where interest rates go up? Insane

Practically every single bond - which banks effectively have to buy and hold for regulatory reasons - has reduced in mark-to-market value every single day the last 2 years.

Personally I think they are nuts for having (reportedly) such a long average duration of bonds in their portfolio, but they were also paying a pretty decent interest rate on savings to their customers - that money has to come from somewhere.

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

#55

Post by Lightbody »

Disclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess.

We were reluctant to move our funds most of the day yesterday. Felt like a lot of dumb panic. We had emails from a few investors, most saying "stay calm" but one saying "move your money to this bank that I'm invested in!" ugh.

We decided near the end of the day to move at least half our funds (in a money market) out, but by then it was too late to initiate anything. Now we're finding this morning nobody at SVB is returning our calls. We are able to log into the online portal just fine. So not sure if/when we'll be able to to move anything.

Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line.

Note: I'm still not actually worried that our money will evaporate permanently. But I can definitely see a situation where it is inaccessible for several weeks, causing issues with payroll and operations. I expect worst case a large bank will swoop in last second and buy all the dumb investment vehicles/bonds for pennies on the dollar and then our access to cash will come back.

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

#56

Post by dahdum »

bhouston wrote: post #35

I think that the bank gets rescued, probably very soon, the next few days. To let it fail will harm a significant portion of the US startup community and damage the country's ability to continue to innovate. In many ways, it is too big to fail because of its ties to the startup community. I think there is no other solution right now be a federal rescue of SVB. It is likely insolvent right now if they had to sell thei…

A federal rescue is fine by me, as long as the government turns a profit (like TARP), and the investors/management get clobbered before anyone else. Otherwise we are just encouraging more bad behavior.

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

#57

Post by ensignavenger »

lotsofpulp wrote: post #6
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.

Technically, you are not “banking” with Mercury: > Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust®; Members FDIC.

Mercury has partner banks though, so you are still banking, just through an intermediary. The banks still hold the funds. (Depending on the product you use).

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

#58

Post by jtarud »

I think this thread will have tons of views from people in the startup world that are likely to be SVB customers. If we all agree to not do run in the bank, it will improve chances for SVB to make it through the next few days.

I'll start with committing not to withdraw money my company [redacted] holds in the bank.

We stand by SVB.

I invite others to do the same.

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

#60

Post by adamsmith143 »

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…

What could possibly go wrong running a bank by working with the most volatile companies on Earth with failure rates above 90% lol.
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