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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?

#161

Post by riseagainst22 »

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…

This is true. most startups are trying to bank with the company I work at now and switch from SVB to us, it is a fucking panic and some of these companies are trying to send us 100's of mill cash in hand

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

#162

Post by sergiomattei »

Lightbody wrote: post #112
Lightbody wrote: post #55

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 le…

Well this comment aged well

Thoughts now?

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

#163

Post by bjacokes »

KerryJones wrote: post #142
cityofdelusion wrote: post #129

Earlier quoted context omitted.

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.

I was looking at buying in with 1/60th or less of my portfolio (I'm a focused investor, most of my investments are 1/10th of my portfolio) so it would have been a small bet, I was acknowledging this as risky. I'm still not confident I was 100% wrong -- in my scenario I labeled above included the fact they could go under (I didn't think they would go under), but now that their assets being are being sold, it will depe…

You're mistaking assets and equity. A 40% discount in asset value absolutely would wipe out shareholders. To be a bit blunt, given your thesis here I would advise against trading in individual stocks, at least in the banking sector.

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

#164

Post by sergiomattei »

jtarud wrote: post #58

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.

RIP

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

#165

Post by asimpletune »

gizmo wrote: post #102
asimpletune wrote: post #74

Earlier quoted context omitted.

It's not a solvency problem. The bonds are valued based on when they mature, not what they fetch on the open market. It is a liquidity issue, which means the money is there, but they can not access the money in the amount of time they need it by.

It is a solvency issue because they are legally obligated to give people their money back when they ask for it. If none of the customers would withdraw money for the next 10 years they would be fine. But the customers are startups that have expenses like payroll and AWS. And the climate for raising money is bad, which means a lot of money is being withdrawn every month, and not much new money is getting deposited.

That is not what insolvent means though. There is a difference in not being able to pay back depositors bc you gambled it away on magic beans vs it’s tied up in safe bonds. In both situations you can’t satisfy depositors immediately, but they’re otherwise very different.

For one thing, people buy companies that are insolvent, eg svb, they don’t buy magic bean farms, eg ftx.

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

#166

Post by disgruntledphd2 »

mrelectric wrote: post #87
jtarud wrote: post #58

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.

I wouldn't share my company name in this context.

Oh wow, I only saw the [redacted] version. Probably for the best.

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

#167

Post by neilknowsbest »

zamnos wrote: post #131
mikeyouse wrote: post #103

Earlier quoted context omitted.

Not sure why this is downvoted. FDIC-insured accounts have never lost funds in the nearly 100 years since the FDIC was established. And I think there was one? maybe two? times depositors lost funds in excess of the FDIC limits over that same time frame?

When Lehman Brothers collapsed in 2008, many people lost money over $100k. So many, that FDIC retroactively raised the insured limit to $250k and made people whole up to $250k . A lot of the money over that simply evaporated. Today, the limit is $250k, but as SVB's clients were mostly startups, and startups need to make payroll and pay operating expenses like their AWS/GCP bill, they'd easily have cash in excess of $…

To be sure, Lehman Brothers was not a depository institution. FDIC insurance protects only insured deposits up to the limits, and thus was not in play for creditors to Lehman.

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

#168

Post by KerryJones »

bjacokes wrote: post #163
KerryJones wrote: post #142

Earlier quoted context omitted.

I was looking at buying in with 1/60th or less of my portfolio (I'm a focused investor, most of my investments are 1/10th of my portfolio) so it would have been a small bet, I was acknowledging this as risky. I'm still not confident I was 100% wrong -- in my scenario I labeled above included the fact they could go under (I didn't think they would go under), but now that their assets being are being sold, it will depe…

You're mistaking assets and equity. A 40% discount in asset value absolutely would wipe out shareholders. To be a bit blunt, given your thesis here I would advise against trading in individual stocks, at least in the banking sector.

In general I agree that banking sector is definitely not strongly in my circle of competence, but on my only long-term bank I'm in I've made 100+% ROI within a couple of years. That could certainly be luck. To give advise on what I should do investing seems a bit premature with no more information -- even on banking stocks.

I did make a mistake in previous comment and used the word assets instead of Total Equity. The same principle applies -- FDIC will sell their assets, likely at a discount.

Depending on the discount of those assets will determine how much total equity they have. Currently, their assets over liabilities is large, so there would have to be significant underselling of assets.

My original thesis made it clear I was talking about 40% discount on their equity, I didn't make it clear in the subsequent thread.

I.e. if bought at the last price ($40) their assets priced them in some range between $150-220/share (if they were sold off). So they would have to have a significant discount to their assets in the last 2 months since they reported to lose that much.

In my book and using Graham's term, I was valuing this as a cigar-butt company.

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

#170

Post by neilknowsbest »

mikeyouse wrote: post #103
diebeforei485 wrote: post #84

Earlier quoted context omitted.

There have been pretty much zero instances of people's money evaporating from U.S. bank accounts, even above the FDIC guarantee.

Not sure why this is downvoted. FDIC-insured accounts have never lost funds in the nearly 100 years since the FDIC was established. And I think there was one? maybe two? times depositors lost funds in excess of the FDIC limits over that same time frame?

Failed banks that have been resolved by the FDIC have, in fact, seen depositors lose money on non-insured deposits (i.e. deposits in excess of the insurance limits). FDIC makes payments, called "dividends", to depositors. The history of dividend payments for failed banks can be found here [0]. For reference, SVB has about $200B in assets.

The largest failure to-date was WaMu in the 2008 financial (approx $300B in assets). Depositors were paid back 100%. The largest failure prior to WaMu was IndyMac (approx $100B in assets). Depositors were paid back 50%. No additional dividends have been paid out to depositors.

According to Wikipedia [1], the last three >$1B failures were Guaranty in 2017, Doral in 2015, and First National in 2013. Depositors in each of these three cases received less than 100%, averaging around 80%.

[0] - https://closedbanks.fdic.gov/dividends/ [1] - https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...

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