SVB collapse could mean a $500B venture capital ‘haircut’
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Re: SVB collapse could mean a $500B venture capital ‘haircut’
#2Re: SVB collapse could mean a $500B venture capital ‘haircut’
#3As an independent developer (misv) working on my projects part time out of necessity, I look forward to a tech market where well funded businesses give away their software for free until they establish a monopoly mostly disappear. I don’t think this will do it, but it helps make me think they won’t have spigots of easy money flowing in to their accounts.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#4Startup valuations had gotten too rich.
Now they're coming down to more reasonable levels, in fits and starts.
VCs and their LPs don't want the write-offs. They're painful.
But ultimately, I think the write-offs will prove healthy.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#5I wonder how this will play out for today's mid stage startups. Do they acknowledge their prior rounds as being inflated? Do they try to say the course and double again? Their burn rates will likely not be easy to cut down in the short run.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#6Good. All those 0% interest leveraged VC funds can go burn in a fire. They pumped stupid money into companies and inflated valuations. Now that things are getting saner with real interest rates above 0 and getting higher sanity will reign again in the markets.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#7“Extend and pretend” shows how ridiculous this all really is.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#8Play bank run games, win bank run prizes.
Really, I don't love the regulatory arbitrage played by SVB and unhedged duration risk, nor the moral hazard created by the bailout, nor the somewhat bizarre attitude of companies holding huge $100Ms of uninsured deposits earning minimal interest (why have more than 1 months cash flow?), but really this was a bank run pure and simple. When you have to plan to lose >20% of your deposits in a single day you're not a bank anymore. That is a money market account or some other product, which doesn't lend long. It's a bit apropos that those who started the run will pay part of the price, although there's a LOT of collateral damage, and I don't doubt those who started it will ultimately turn that to their advantage since they have the deepest pockets.
https://www.cnn.com/2023/03/14/tech/viral-bank-run/index.htm...
BTW you can blame the Fed for low interest rates, but it's the yield curve inversion and long rates which caused the liquidity/solvency problem not the short term rate hikes (not raising short rates would increase inflation expectations and push 10y rates even higher!). And there is no hard line between solvency and liquidity, because it all has to do with time scale. If I say you have to give me $1000 in the next 3 seconds or I take your car, you can't do it because you can't reach your wallet fast enough.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#9Good. All those 0% interest leveraged VC funds can go burn in a fire. They pumped stupid money into companies and inflated valuations. Now that things are getting saner with real interest rates above 0 and getting higher sanity will reign again in the markets.
Real interest rates (nominal interest rate minus inflation rate) is still negative.
Re: SVB collapse could mean a $500B venture capital ‘haircut’
#10It simply wasnt booked, some might say "they" needed an excuse to justify markdowns. So many assets are not marked to market which gives outsiders the false impression.