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SVB Hall of Shame

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Re: SVB Hall of Shame

#271

Post by danielmarkbruce »

twelve40 wrote: post #230
danielmarkbruce wrote: post #217

Earlier quoted context omitted.

They lost $12 billion on an interest rate bet. The fact they didn't need to mark it to market under an accounting rule didn't mean people ignored it. It was a giant, known problem. It's why they were out trying to raise capital.

I'm talking about the "rumors" that caused the bank run. From what I've read (quoted above), these weren't really rumors but problems with day-to-day transfers that prevented the fund(s) from completing their deals, in which case one has to be insane not to let their friends know that the bank is not transferring money like they are supposed to. In hindsight we know they had problems like you said, but the "spread ru…

It wasn't hindsight though. They filed their 10-k well before the run and it showed a disaster of a situation. Their balance sheet was progressively getting worse, it was already bad the 10-q before. People knew it was problematic months ago, this didn't come out of nowhere.

Re: SVB Hall of Shame

#272

Post by yafbum »

fwlr wrote: post #83

I’m not going to be using this site to guide my opinions of VCs, I don’t generally outsource that much of my opinion-making to 3rd parties. But it does broadly reflect my opinions, you could get a very rough “general direction” picture of how I think from reading it. “It’s rational to join a bank run, VCs would have been negligent to their companies if they advised to stay” I know! Believe it or not I have studied a…

You forget to consider, in your blame list, the people who created the unstable situation in the first place. If I put a pencil on a table, balanced on its tip, can we find which puff of wind to blame when it falls?

The bank's leadership, for example, by choosing to focus heavily on one industry known for rash herd behaviors, both benefited from it some (lots of VCs recommending them) and now seems to have been undone by it.

The bank's regulators might have also looked the other way, we'll find out more.

Re: SVB Hall of Shame

#273

Post by gmd63 »

dev_tty01 wrote: post #261
leereeves wrote: post #250

Earlier quoted context omitted.

I'm pretty sure they mean that if the VCs hadn't advised companies to withdraw all at once, the crisis might never have happened, and March 11th might simply have been a nice day for a walk.

When the Moody's data became known it was going to happen one way or another. Well over 90% of the accounts were uninsured. Someone was going to pull money. Perfect unanimity in inaction was simply not possible. Given that scenario, it is a rational response to try and be first out the door. The fault here is with SVB management making some very bad decisions and with VCs not looking at the publicly available data an…

The fault is also with VCs who mandated that portfolio companies concentrate large uninsured deposits in one bank, increasing the risk of a run. The bank to my knowledge didn’t even offer insured cash sweeps, a basic financial product for deposits above 250k.

There is a clip I saw on twitter as this was happening of Jason Calacanis bragging insufferably about his special treatment from SVB in obtaining quick and favorable terms for a private mortgage, likely thanks to the amount of business he and other investors brought the bank.

So no, I reject your claim that the same people that would design Class A shares to be inferior to Class B shares, then say “no takesy backseys!” when executing a hostile takeover of your company are not at fault here.

How can a discipline that prides itself in superior networking ability, information gathering, and prudent decision making not be at fault for pooling a stupid amount of wealth in the first bank to go broke post COVID bubble?

Re: SVB Hall of Shame

#274

Post by idopmstuff »

tptacek wrote: post #108
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

Isn't this misinformation? The Chief Admin Officer of SVB Securities was an exec at Lehman, but SVB Securities is independent of SVB. If you Google [svb lehman], you get pages and pages debunking this.

The fact that SVB securities is independent is irrelevant to the point, which is that people who play roles in financial catastrophes do not become unemployable as a result.

Re: SVB Hall of Shame

#275

Post by dev_tty01 »

gmd63 wrote: post #273
dev_tty01 wrote: post #261

Earlier quoted context omitted.

When the Moody's data became known it was going to happen one way or another. Well over 90% of the accounts were uninsured. Someone was going to pull money. Perfect unanimity in inaction was simply not possible. Given that scenario, it is a rational response to try and be first out the door. The fault here is with SVB management making some very bad decisions and with VCs not looking at the publicly available data an…

The fault is also with VCs who mandated that portfolio companies concentrate large uninsured deposits in one bank, increasing the risk of a run. The bank to my knowledge didn’t even offer insured cash sweeps, a basic financial product for deposits above 250k. There is a clip I saw on twitter as this was happening of Jason Calacanis bragging insufferably about his special treatment from SVB in obtaining quick and favo…

Yes. I agreed that the VCs are at fault for poor decisions relating to their use of SVB in the face of known issues with the bank. I also agree with your additional point that the initial concentration of uninsured funds in a single bank was also a bad idea.

Re: SVB Hall of Shame

#276

Post by antics »

notch898a wrote: post #241
antics wrote: post #238

Earlier quoted context omitted.

Ok, I'm not sure where this is going. You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover…

>You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover's portfolio. The (alleged) 'prime mo…

Ok, I see a lot of points here but reading them I do not get the sense that you really understood what I wrote, and they don't seem to be connected to what you wrote before. So I guess the best option forward is to just go back to what you actually said so that you can try again:

> the question is if FF had done nothing, would they have been better off?

Yes. We know that FF did not get their portcos fully out in time, including the only company they need to return the fund. Their portfolio downside might be partially mitigated—they totally lose, let's say, 40% of seed-B portcos instead of 70%—but it doesn't really matter because a non-backstopped run kills 80% of seed-B startups immediately.

The rational move for companies is to pull out but for VC firms the rational move is to encourage people to stay.

Re: SVB Hall of Shame

#277

Post by tptacek »

idopmstuff wrote: post #274
tptacek wrote: post #108

Earlier quoted context omitted.

Isn't this misinformation? The Chief Admin Officer of SVB Securities was an exec at Lehman, but SVB Securities is independent of SVB. If you Google [svb lehman], you get pages and pages debunking this.

The fact that SVB securities is independent is irrelevant to the point, which is that people who play roles in financial catastrophes do not become unemployable as a result.

You didn't say that. You said "the CAO of the bank" was a Lehman person. That's not true.

Re: SVB Hall of Shame

#278

Post by MacroChip »

fwlr wrote: post #83

I’m not going to be using this site to guide my opinions of VCs, I don’t generally outsource that much of my opinion-making to 3rd parties. But it does broadly reflect my opinions, you could get a very rough “general direction” picture of how I think from reading it. “It’s rational to join a bank run, VCs would have been negligent to their companies if they advised to stay” I know! Believe it or not I have studied a…

It wasn't a prisoner's dilemma. Cooperating gets you almost nothing while defecting gives you benefit. It was nearly the opposite of the prisoner's dilemma. Couldn't another school of thought "blame" those who didn't participate loudly?

Re: SVB Hall of Shame

#279

Post by notch898a »

antics wrote: post #276
notch898a wrote: post #241

Earlier quoted context omitted.

>You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover's portfolio. The (alleged) 'prime mo…

Ok, I see a lot of points here but reading them I do not get the sense that you really understood what I wrote, and they don't seem to be connected to what you wrote before. So I guess the best option forward is to just go back to what you actually said so that you can try again: > the question is if FF had done nothing, would they have been better off? Yes. We know that FF did not get their portcos fully out in time…

The whole house of cards you are relying on here is the bank run would not have happened had FF not made the move. The facts presented to not rise to such certainty.

Re: SVB Hall of Shame

#280

Post by hnfong »

slenk wrote: post #270
HDThoreaun wrote: post #269

Earlier quoted context omitted.

If deposits kept increasing they might've been ok, but startups had been withdrawing the cash they had raised during the pandemic, deposits were decreasing rapidly before the solvency issues were thought about. At that point there is a very real scenario where the bank runs out of money and depositors are screwed.

I feel like if it were slower though, then the bank would have been fine. Granted, I can't talk about the board or their investing decisions because I don't feel educated enough to speak on that part.

There's no way to "feel" this, if you can look at items on their balance sheet you can determine whether their assets at fair value covers their outstanding debt of not. IF it doesn't, it's likely the bank would break sooner or later, if there was no bank run, it would have died a slow and painful death anyway (or, more likely, somebody would try to make risky bets in attempt to recover).

There hasn't been a buyer yet, which indicates the perhaps the assets aren't that great.

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