FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#211

Post by FormerBandmate » Fri, Mar 10, 2023, 5:24 PM UTC

banku_brougham wrote: post #107

testfoobar wrote: post #43

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731...

Its so funny until you realize your seed-round investment in a friends company used SVB. Gonna be quite a show, this.

Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only time will tell how much they’ll be able to recoup. It’s not an FTX situation, the assets are somewhat there, but the losses in securities look extreme and unwinding them at a fair price may take months, if not years

Re: FDIC Takes over Silicon Valley Bank

#212

Post by senttoschool » Fri, Mar 10, 2023, 5:25 PM UTC

hijinks wrote: post #170

senttoschool wrote: post #64

What happens to the deposits above $250k in this case? Ouch for startups that didn't pull.

they turn into creditors of the bank to try to get the money back from asset sales. That could take years though it isn't quick

Isn't that a death sentence for a startup? Even if you get your money back years later, you're company is already dead because it can't make payroll. At that point, the money will just go back to the VCs?

Re: FDIC Takes over Silicon Valley Bank

#213

Post by hef19898 » Fri, Mar 10, 2023, 5:25 PM UTC

NordSteve wrote: post #195

omgomgomgomg wrote: post #165

Earlier quoted context omitted.

But why would the startups become illiquid? Do they get the investments from the banks or do they park the investment money in this bank? And why this bank, when there are many more risk averse institutions out there?

For business banking, you want a bank that understands your business. SVB was in the first rank of banks that understood startups. Many startups aren't particularly sophisticated financially and just kept their capital in cash in the bank.

What did James Ray say again about FTX? Something along the lines of "a group of highly unsophiscated people"? Man, the CFOs of the affected start-ups should all look for a new job. By the way, preventing things like that is something a good MBA does.

Re: FDIC Takes over Silicon Valley Bank

#214

Post by berkle4455 » Fri, Mar 10, 2023, 5:25 PM UTC

banku_brougham wrote: post #107

testfoobar wrote: post #43

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731...

Its so funny until you realize your seed-round investment in a friends company used SVB. Gonna be quite a show, this.

They’ll most likely be made whole or close to whole. It’ll just take time, so as long as that startup doesn’t have a huge burn already, should be fine. Anyway you bought % in their company which you still own, the cash was gone when you wired it.

Re: FDIC Takes over Silicon Valley Bank

#215

Post by kmlx » Fri, Mar 10, 2023, 5:26 PM UTC

Silicon Valley Bank UK confirms it’s a standalone independent UK regulated bank.

London, 10 March, 2023: Silicon Valley Bank UK, the financial partner of the innovation economy, today moved to confirm to its UK clients, partners and external stakeholders its financial position as a standalone independent banking institution that is regulated and governed by the PRA in the UK.

Silicon Valley Bank UK has been an independent subsidiary since August 2022 with a separate balance sheet to the SVB Financial Group and an independent UK Board of directors. Silicon Valley Bank UK fully abides by the UK regulatory requirements as covered by the Financial Services Compensation Scheme and by the Financial Ombudsman Service. SVB UK, Ltd. is ring-fenced from the parent and its other subsidiaries.

Notes to editors

Funds from client deposits placed with SVB UK, Ltd. are managed in the UK for the benefit of our UK clients. None of our operations in the EU outside our UK Subsidiary are licensed to or take deposits.

https://www.svb.com/press/release?Channel=45991&Account=SVB_...

Re: FDIC Takes over Silicon Valley Bank

#216

Post by capableweb » Fri, Mar 10, 2023, 5:26 PM UTC

roflyear wrote: post #146

So let's say you work at a startup that has all their cash at SVB. Are you basically without a job now?

Depends on how big the startup is, how high the burn rate is and how on top of things the founder is and if they managed to pull the money before everything broke down. If the startup is small, you should be fine, $250K should be accessible relatively quickly, beyond that will be a process that can take long time and there is no guarantees.

But a small scrappy startup with not super high burn rate might be hugely impacted. Large startups with high burn rate are pretty much screwed though and are gonna have to downsize pretty aggressively and quickly.

Re: FDIC Takes over Silicon Valley Bank

#217

Post by FormerBandmate » Fri, Mar 10, 2023, 5:26 PM UTC

nostromo wrote: post #189

FormerBandmate wrote: post #66

Earlier quoted context omitted.

This case is unique because of the sheer volume of non-FDIC insured deposits. Substantial risk of depositors not being made whole for a while, they’ll probably get all their money but it will still be bad

All their money? I doubt it. SVB owned a bunch of mortgage backed securities and treasuries - both of which are down 30-50% from their peaks, which coincides with our last venture capital boom. SVB was buying at the top because they had so much capital to deploy. Maybe instead of cashing it out, depositors could be given a treasury worth 30% less than SVB paid for it, that pays out 1% a year in interest, redeemable a…

They weren’t insolvent yesterday, they just had a rush of withdrawals. It will probably be upwards of 90 cents on the dollar, but that amount of money locked up in a possible credit crunch coupled with a loss of confidence in banks and the current startup environment is very bad

Re: FDIC Takes over Silicon Valley Bank

#218

Post by morpheuskafka » Fri, Mar 10, 2023, 5:26 PM UTC

woeirua wrote: post #52

LMAO. Can't even believe how many people were confidently asserting that nothing was wrong yesterday. If you had more than $250k in SVB yesterday you probably just took a huge haircut. Hundreds of startups will become illiquid as a result of SVB's collapse, and there will be major layoffs here in the next 90 days as founders realize that they lost their funds and cannot raise in the current VC environment.

> Hundreds of startups will become illiquid as a result of SVB's collapse,

I know SVB was like a "high tech bank" that partnered with things like Stripe Atlas, but is there any reason that startups were using it for their regular operating funds? Other than the name, was there something that actually made this bank particularly suitable for them?

Re: FDIC Takes over Silicon Valley Bank

#219

Post by Exuma » Fri, Mar 10, 2023, 5:26 PM UTC

idlewords wrote: post #38

Now we just need an "incredible journey" blog post from SVB spinning this acquisition as a great win for both customers and investors.

Here's why a bank collapse is a good thing.

Re: FDIC Takes over Silicon Valley Bank

#220

Post by dannyw » Fri, Mar 10, 2023, 5:26 PM UTC

sophacles wrote: post #184

banku_brougham wrote: post #107

Earlier quoted context omitted.

Its so funny until you realize your seed-round investment in a friends company used SVB. Gonna be quite a show, this.

Isn't the investor justification for taking a huge chunk of profits "we take risk"? I fail to see how this is unfunny just because the risk you took played out in the bad way.

More people will lose jobs.