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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?

#121

Post by frellus »

adamsmith143 wrote: post #60
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.

As far as I understood it, the 10% which paid off made SVB into the type of bank it is today.

They obviously made a bad move in 2020-21 in thinking the public market was going to crash and what would happen to bond yields, but so did lots of people.

If you think SVB is the only bank which is making high risk decisions to get payoffs, I would suggest you level up and look at what ALL these banks are doing. Faith in the system and long-term risk assessment isn't built into the mentality of banks which have so much invested in equity trading vs. boring deposits.

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

#122

Post by user_named »

rocqua wrote: post #46
lolinder wrote: post #16

Earlier quoted context omitted.

> 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.)

Treasuries and bonds drop in price when interest rates go up. in 2021 (when interest rates were low) you might pay 100 cents on the dollar for a treasury that payed 2.5% interest. In 2023, with interest rates much higher, you can no longer sell that treasury for 100 cents on the dollar. People can get much better returns by just buying recent treasury. So you need to sell your bonds lower, at say 95 cents on the doll…

It's more like 50 cents on the dollar.

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

#123

Post by user_named »

KerryJones wrote: post #44
lolinder wrote: post #16

Earlier quoted context omitted.

> 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.)

They factually lost 1.8B on 21B worth of investments, this is an 8.5% loss. Unclear why there's conjecture like previous comments saying its a 25% loss. They did the right thing by selling out now -- likely because they see more rates raising in the future which would decrease it, so they took the liquidity and then raised a bit of money to cover up that loss (raising 2.25B)

No, they did the wrong thing by selling so late.

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

#124

Post by user_named »

KerryJones wrote: post #113
KerryJones wrote: post #50

Investor here (trying to buy into SVB), but I don't currently own anything, nor do I have any current accounts with SVB. Everything I can see about them is completely overblown. Short and sweet version of research so far: - They had sold their bond portfolio for 1.8B loss (originally 21B, this is 8.5% loss) - They decided to raise money to match that loss (news release on 3/8/23) - Headlines are confusing people with…

Well, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html

Yes but you were very confident in everything you said that was wrong, so I guess that's all that matters

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

#125

Post by trillic »

chasely wrote: post #48
karpierz wrote: post #18

Earlier quoted context omitted.

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 discoun…

Why would they buy 10-year bonds when their depositors are startups, many of whom won't exist in 10 years? Seems like shorter-term T-bills would have been more appropriate, but I know next to nothing about finance.

Shorter term bonds typically yield significantly less. Except the past year or so we’ve had “yield inversion” where the shorter term bonds are actually paying out more than long term bonds. This is an indicator of incoming economic downturn as it indicates institutions need cash now and are willing to pay for it.

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

#126

Post by raesene9 »

paulette449 wrote: post #115
raesene9 wrote: post #19

Earlier quoted context omitted.

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...

Almost all banks on that list failed during the aftermath of Black Monday (1987) or during the Great Financial Crisis (2007-2010).

Yep banks that took on excessive risk in times of expansion.... And as SVB has failed today as has Silvergate recently, it seems we are looking at some level of issue.

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

#128

Post by yanderekko »

whitemary wrote: post #96
toomuchtodo wrote: post #82

Earlier quoted context omitted.

A bailout is not guaranteed. How long it takes to be made whole is unknown. How long can you go without cash while regulators work out the details. How long will payroll and creditors wait for you to get your cash back. Hope for the best, plan for the worst. Edit (epoch time 16784666958): https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-... (Silicon Valley Bank is shut down by regulators, FDIC to protect i…

Nonsense. A bailout has more precedent now, and the current political situation with the Democrats in the White House virtually guarantees it. The last bailout never had a precedent or approval of the American people, but they did it anyway and they will do it again. Capitalism doesn’t allow planning for the worst. Karl Marx showed us this 150 years ago, and the working class is regularly reminded in blood, but the r…

>Capitalism doesn’t allow planning for the worst.

Governments bailing out banks is not capitalism.

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

#129

Post by cityofdelusion »

KerryJones wrote: post #113
KerryJones wrote: post #50

Investor here (trying to buy into SVB), but I don't currently own anything, nor do I have any current accounts with SVB. Everything I can see about them is completely overblown. Short and sweet version of research so far: - They had sold their bond portfolio for 1.8B loss (originally 21B, this is 8.5% loss) - They decided to raise money to match that loss (news release on 3/8/23) - Headlines are confusing people with…

Well, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html

You dodged a bullet. Definitely find out what assumptions you made that were wrong, that could be a very costly mistake in the future. Betting against market headwinds that are blowing strong is always very risky, even when you are correct since sheer momentum can kill an investment.
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