Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

SVB collapse could mean a $500B venture capital ‘haircut’

bloomberg.com

Post reply on HN
Print view View original

21–30 of 181 posts

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#21

Post by gumballindie »

guestbest wrote: post #3

As 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.

This comment is underrated. Basically what these businesses do is they sell their products at a dumping cost. If that practice is illegal for physical products then so should it be for software.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#23

Post by dehrmann »

spaceman_2020 wrote: post #11
cs702 wrote: post #4

Startup 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.

I also think that tech is moving very fast, and startups with 10+ years of unprofitable existence without any potential exit are going to get disrupted by newer players. The current crop of startups have largely been pioneers, but usually, the settlers take away the bulk of the spoils. In India, Uber got everyone used to the idea of app based cabs. Now newer players are eating away Uber’s lunch with newer models and…

> startups with 10+ years of unprofitable existence without any potential exit are going to get disrupted by newer players.

It depends how unprofitable. Well-established products like Twitter and Reddit are big, have an established user base, and while not particularly profitable, I also don't see them getting disrupted by a rising competitor.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#24

Post by rcme »

kurthr wrote: post #8

Play 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 you…

The Fed’s owns projections have rates coming down in 2 years. Of course the 10Y yield curve is inverted.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#25

Post by dehrmann »

cs702 wrote: post #4

Startup 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.

The takeaway from SVB is that there are a lot of losses in asset values either because of the pandemic (SF office space) or rising interest rates (home prices, startup valuations) that have yet to be realized.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#26

Post by deltree7 »

bbbbzzz1 wrote: post #13
deltree7 wrote: post #12

Earlier quoted context omitted.

It's delusional to think that this won't have effects on most HNers employment/salary. So be careful what you wish for

More tame inflation for people who maintain their good paying jobs will be in an even better position

Deflation is always worse than inflation. 1930s is always worse than 1980s.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#27

Post by jgilias »

kurthr wrote: post #8

Play 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 you…

You sound like you have a good grasp of this!

What’s your take on the observation that historically after the yield curve inversion ends, it’s 3-6 months until a recession?

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#28

Post by mitthrowaway2 »

kurthr wrote: post #8

Play 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 you…

> 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

Can't we sort of blame the Fed for that [yield curve inversion and long rates] too? It undertook massive quantitative easing during the pandemic, which depressed the yield of long-term bonds such as those bought by SVB. Perhaps if it hadn't done so much QE, the yield on SVB's long-term bonds would have gone from, say, 3% to 4% instead of 1.56% to 4%.

Edit to clarify: I'm not saying that the Fed deserves blame for SVB taking such a risky long-term position, I'm saying the Fed deserves some blame for long-term bonds being risky.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#29

Post by LapsangGuzzler »

kurthr wrote: post #8

Play 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 you…

SVB also chose not to prioritize hiring a risk manager for months leading up to their collapse, which is just pure stupidity. Anyone worth their salt would've pointed out that they were at risk due to their investment strategy and homogeneous customer base.

We're seeing old lessons from the 80's being retaught in the banking world.

Never put all of your cash in one bank. Keep your debt and your liquidity held in separate banks because if you don't and your bank goes under, your bank debt is written off against your balance when the bank liquidates.

The hyper-connected world we've created prioritizes efficiency and optimization at the expense of operational redundancy, which leads to people getting caught doing stupid things like putting all of their money into one business bank that had no visibility into their own risk profile.

Re: SVB collapse could mean a $500B venture capital ‘haircut’

#30

Post by LapsangGuzzler »

mitthrowaway2 wrote: post #28
kurthr wrote: post #8

Play 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 you…

> 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 Can't we sort of blame the Fed for that [yield curve inversion and long rates] too? It undertook massive quantitative easing during the pandemic, which depressed the yield of long-term bonds such as those bought by SVB. Perhaps if it hadn't don…

> Can't we sort of blame the Fed for that too?

No. SVB chose to pursue a risky investment strategy with no risk manager at the helm for months, the banking equivalent of stupidly storing all of your nitrous fertilizer in one place and then being surprised when the whole thing blows up.

SVB made numerous, critical mistakes in their management. If anything, one could argue the Fed enabled this stupidity by keeping rates low for so long. But ultimately, the failure falls on the bank.

Post reply on HN