The bank has officially failed, as per FDIC. "Silicon Valley Bank is the first FDIC-insured institution to fail this year." https://www.fdic.gov/news/press-releases/2023/pr23016.html
"first... this year" is it me or is that unintentionally foreboding
Four failed in 2020. Four failed in 2019. None failed in 2022 or 2018. Banks fail fairly regularly, but it's the size of the bank and the types of deposits that are concerning in this case.
The bank has officially failed, as per FDIC. "Silicon Valley Bank is the first FDIC-insured institution to fail this year." https://www.fdic.gov/news/press-releases/2023/pr23016.html
"first... this year" is it me or is that unintentionally foreboding
Startups with good VC and investor relationships will most likely make payroll and pay bills through short term loans from the investors until they can access their funds. But it is a good lesson in money management…something about eggs and just one basket?
Here’s somethingI don’t understand. Say you raise $100m funding round. Investors just give you the entire amount, in cash? And companies just put that entire cash amount in a bank? It seems like it would be better for VCs to keep the money, invest it (in, I don’t know, the S&P500), and then pay out to the companies on a monthly basis or some other terms. I can’t fathom how there are hundreds of companies, each with 1…
Let's assume most companies don't generally have drooling morons for CFOs because, well, they don't. The majority of unneeded funds are invested somewhere, most likely a managed fund. So the amount of cash sitting at SVB earning zero percent interest is relatively small. But when you have 30 people making $120/yr, and payroll is due this week ($300k), and your $1m/month AWS/GCP bill is also due this week (skip the rent of the office since everyone's working remote); the SVB account will have $1.3 million in it to pay upcoming obligations.
"first... this year" is it me or is that unintentionally foreboding
https://www.fdic.gov/resources/resolutions/bank-failures/fai... Four failed in 2020. Four failed in 2019. None failed in 2022 or 2018. Banks fail fairly regularly, but it's the size of the bank and the types of deposits that are concerning in this case.
SVB was the biggest bank in Silicon Valley (2nd in California), and the 18th largest bank in the entire US.
I knew this whole thing was big as I personally know a lot of friends use SVB for their startups, but I failed to realize how big deal this is. How can the 16th biggest bank in the country fail so rapidly?
Here’s somethingI don’t understand. Say you raise $100m funding round. Investors just give you the entire amount, in cash? And companies just put that entire cash amount in a bank? It seems like it would be better for VCs to keep the money, invest it (in, I don’t know, the S&P500), and then pay out to the companies on a monthly basis or some other terms. I can’t fathom how there are hundreds of companies, each with 1…
Let's assume most companies don't generally have drooling morons for CFOs because, well, they don't. The majority of unneeded funds are invested somewhere, most likely a managed fund. So the amount of cash sitting at SVB earning zero percent interest is relatively small. But when you have 30 people making $120/yr, and payroll is due this week ($300k), and your $1m/month AWS/GCP bill is also due this week (skip the re…
Some startups just moved excess funds into a money market account at SVB (managed by e.g. BlackRock)..
I'm not sure who is ultimately custodial of that money, and whether it's at risk today. My instinct is that it's at BlackRock, any idea if that's true?
Yup. FDIC insurance exists for this reason -- you can let a bank that made bad decisions fail without causing a chain reaction through the economy.
Yeah, although SVB's failure demonstrates a major shortcoming with deposit insurance (in its role as a deterrent for bank runs). If you have more than $250k in assets, or are worried about short-term liquidity, you're still incentivized to run from the bank.
Correct me if I'm wrong, but FDIC insurance is mainly to protect individuals / small businesses from lose their entire livelihood, they're unlikely to have more than $250k in their bank account at any given time. If you do, you're most likely in/above the 1% and will survive by other means if you lose everything above $250k (or, rightly be "punished" for not having any other survival mechanism)
If everyone’s saying we’re in a bubble, we probably are. Just because it keeps getting bigger doesn’t mean it’s not going to pop. We’ve had 15 years of people getting billions for phone apps made in 12 months and forgotten in 6. Random individual software startups are valued more than basically the entire hardware industry under them. Bitcoin peaked out at 1.28 trillion and it still has no use beyond being a converte…
If literally everyone's saying we're in a bubble, by definition we wouldn't be. Nobody would be buying at ever higher prices in a bubble, so who's making those trades? Sure, you might claim those people are unhinged and don't count, but they'd say the same to you. Unless you actually start going to your broker and buy a bunch of PSQ your comments here carry as much weight as mine.
People can simultaneously believe they're in a bubble and still be buying. They may believe that they'll be able to sell before it pops. Or they may believe if it keeps growing long enough it won't matter that it's a bubble, because they'll have made enough money.
https://www.fdic.gov/resources/resolutions/bank-failures/fai... Four failed in 2020. Four failed in 2019. None failed in 2022 or 2018. Banks fail fairly regularly, but it's the size of the bank and the types of deposits that are concerning in this case.
SVB was the biggest bank in Silicon Valley (2nd in California), and the 18th largest bank in the entire US. I knew this whole thing was big as I personally know a lot of friends use SVB for their startups, but I failed to realize how big deal this is. How can the 16th biggest bank in the country fail so rapidly?
I believe the implication is: why aren't we using the fed for our banking, this kind of bank run would be impossible. The fed provides guarantees to banks but not to retail and that's a policy decision we could change, if we wanted to.
We're making some progress in that direction. The FedNow program will provide retail money transfer services [0]. This should make it much more practical to do direct stimulus efforts like we saw during COVID.