Q from outside the US: why is capital needed for payroll mid month? Are there some automatic insolvency processes if it is missed by a day? Why do the companies fall apart if there is just a few days of payment delay? (I mean it is obviously a shit situation, and having to tell the team payment might take a few days more than usual is bad, I am just surprised how 2 days of no-cash seem to wreak havoc…)
OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
41–50 of 124 posts
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#42Earlier quoted context omitted.
Ofcourse it is an oversimplification but it really is that simple. If the business is profitable, it will survive. If its still relying on free money to pay the bills, its time to make it profitable.
The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one. The most bestest startup in the world would still be relying on investor's money to pay the bills if it's just starting to build its product and the time to make it profitable will come in a year or two or more (e.g.…
> The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one.
For the past 10 years or so none of the "successful wrothwhile startups" have positive cash flows, and those that seemingly do still manage to post hundreds of millions of dollars in losses yera after year after year.
The whole modern startup business is either "work at a loss until a successful exit for the founders" or "work at a loss forever with no expectation of profitability for some reason".
None of them are worthy.
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#43Just one anecdote of many. I'm a founder of a bootstrapped startup. We are/were with SVB. On Thursday I tried to get a Brex cash account setup to move some operational cash there but it didn't happen in time. I thought of wiring money out of SVB to my personal account but decided it felt too dodgy. Payroll for 2 weeks ending March 15th had to be funded through Gusto by tomorrow (March 13th). So I did all I could do w…
How much cash do you have available?
Other threads over the past few days scoffed at having 100-200k in cash available.
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#44One of those rare opportunities to clearly assess VCs from the outside, and surprisingly good steady reaction by him and Khosla. Who else?
Khosla’s legacy is trying to privatize public beaches. Nothing he does will make people forget that.
Not necessarily disagreeing but still worth pointing out that he did the right thing here.
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#45Commendable of course but also feels like a no brainer. Depositors will almost certainly be made whole. Word will spread of the deed and the goodwill generated will more than repay the low-risk short term loan.
Based on my interactions with Sam, he doesn't seem like the kind of guy who would ever do this for PR. I think he just somehow became aware of this company and, in classic sama fashion, decided it should not fail due to SVB, reached out to the founders, promptly wired them money.
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#46Just one anecdote of many. I'm a founder of a bootstrapped startup. We are/were with SVB. On Thursday I tried to get a Brex cash account setup to move some operational cash there but it didn't happen in time. I thought of wiring money out of SVB to my personal account but decided it felt too dodgy. Payroll for 2 weeks ending March 15th had to be funded through Gusto by tomorrow (March 13th). So I did all I could do w…
i had to do this once during a clerical fuckup with our payroll provider.
the accountants just classified it as a reimbursed expense. you just comp yourself the exact same amount as the payroll and it isn't taxed as income.
in general accountants have ways of dealing with all sorts of edge cases, but you need to keep REALLY good documentation and notes about what/why/how, etc. "i thought the bank was going to collapse, and then it did" is a pretty good reason.
wiring yourself the money and moving it to a new business bank account would have been perfectly fine too - you're simply moving the cash to another location. in fact i'm pretty sure that's what most people who got their money out of svb did - very few small businesses have multiple checking accounts.
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#47Q from outside the US: why is capital needed for payroll mid month? Are there some automatic insolvency processes if it is missed by a day? Why do the companies fall apart if there is just a few days of payment delay? (I mean it is obviously a shit situation, and having to tell the team payment might take a few days more than usual is bad, I am just surprised how 2 days of no-cash seem to wreak havoc…)
Wage payment delays in the state of California are severely punishable under law:
https://www.ottingerlaw.com/blog/wages-hours/employer-not-pa...
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#48Earlier quoted context omitted.
Everyone will have $250K tomorrow.
As an owner who feels responsible to your staff, and who feels bewildered by the sudden closure of your bank, you may not trust what you think you know. Securing alternative funding for your payroll makes sense and is commendable.
Uh yeah, in the very unlikely event that you find yourself explaining to your staff why payroll hasn’t been run, about the last thing you want to lead with is “Well, see, after our our bank failed, I assumed…”
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#49Q from outside the US: why is capital needed for payroll mid month? Are there some automatic insolvency processes if it is missed by a day? Why do the companies fall apart if there is just a few days of payment delay? (I mean it is obviously a shit situation, and having to tell the team payment might take a few days more than usual is bad, I am just surprised how 2 days of no-cash seem to wreak havoc…)
Most companies in the US do payroll on either a 2 week cycle (which sucks because some months you do 3 and some times you do 2), or 1st and 15th (or otherwise twice a month). March 15 is a very common payroll date.
They're batch processes, done by dedicated payroll firms, since there are lots of tax/other obligations as well.
Missing payroll by even one day causes 1) lots of drama with employees 2) starts some legal problems 3) potentially screws up people's healthcare/other benefits 4) potentially causes tax problems. Some of this is with the state, some federal.
Payroll is basically the second to last thing you want to miss (certain government obligations above it, since they have liability for the officers directly).
(This is mostly because employers are presumed to have a lot of power vs. employees, and generally do, and there have been a lot of historical abuses of companies paying people slowly, withholding wages, etc., which puts the employees in a position of "do I quit and guarantee I don't get paid, or do I work a little bit more and maybe collect what I'm owed" and then companies continuing to abuse it...)
Re: OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse
#50Just one anecdote of many. I'm a founder of a bootstrapped startup. We are/were with SVB. On Thursday I tried to get a Brex cash account setup to move some operational cash there but it didn't happen in time. I thought of wiring money out of SVB to my personal account but decided it felt too dodgy. Payroll for 2 weeks ending March 15th had to be funded through Gusto by tomorrow (March 13th). So I did all I could do w…
How much cash do you have available? Other threads over the past few days scoffed at having 100-200k in cash available.
after being here for over 10 years (not on this account), i've observed that hn is basically split into two groups: people with money, and people who don't have much of it.
the people with less money are much more vocal about it, for obvious reasons.