Silicon Valley Bank failure could wipe out 'a whole generation of startups'
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Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#2Maybe focus more on turning a profit than burning millions on operational costs and endlessly raising cheap VC money every month?
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#3my sympathy is with them but please someone explain why companies were putting millions in banks beyond FDIC limit with almost no interest. Could have managed it themselves in a brokerage laddering treasuries or hired someone to do so. This is what big corps do and with interest rates so high seems a no brainier.Would at least think their investors would have insisted on it.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#4my sympathy is with them but please someone explain why companies were putting millions in banks beyond FDIC limit with almost no interest. Could have managed it themselves in a brokerage laddering treasuries or hired someone to do so. This is what big corps do and with interest rates so high seems a no brainier.Would at least think their investors would have insisted on it.
Startup founders are usually not all that well versed in these best practices because it’s the first time they’ve been put in this situation and it’s a distraction from their primary focus to grow the business.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#5my sympathy is with them but please someone explain why companies were putting millions in banks beyond FDIC limit with almost no interest. Could have managed it themselves in a brokerage laddering treasuries or hired someone to do so. This is what big corps do and with interest rates so high seems a no brainier.Would at least think their investors would have insisted on it.
Startup founders are usually not all that well versed in these best practices because it’s the first time they’ve been put in this situation and it’s a distraction from their primary focus to grow the business.
This company put $60 million into its deposit account at SVB. $60 million and they couldn't hire expertise? what about the VCs? Regardless of the risk aspect they were losing probably close to 4% on $60 million. But the risk aspect is not non-obvious. It's something every individual depositor having more than $250,000 is aware particularly after the 2007 financial crisis.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#6my sympathy is with them but please someone explain why companies were putting millions in banks beyond FDIC limit with almost no interest. Could have managed it themselves in a brokerage laddering treasuries or hired someone to do so. This is what big corps do and with interest rates so high seems a no brainier.Would at least think their investors would have insisted on it.
Salaries, rent, debt payments, and AWS bills are charged in dollars. They don't accept T-bills, even though in accounting terms those are "cash-equivalent".
Notice how so much of the fallout is secondary to failed payroll transfers.
Big companies do the same thing, except their cash is kept in bigger banks with more attentive risk-management departments. Apple will never miss payroll due to someone at JP Morgan doing a YOLO on 10-year bonds.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#7my sympathy is with them but please someone explain why companies were putting millions in banks beyond FDIC limit with almost no interest. Could have managed it themselves in a brokerage laddering treasuries or hired someone to do so. This is what big corps do and with interest rates so high seems a no brainier.Would at least think their investors would have insisted on it.
Salaries, rent, debt payments, and AWS bills are charged in dollars. They don't accept T-bills, even though in accounting terms those are "cash-equivalent". Notice how so much of the fallout is secondary to failed payroll transfers. Big companies do the same thing, except their cash is kept in bigger banks with more attentive risk-management departments. Apple will never miss payroll due to someone at JP Morgan doing…
Not an excuse, cash on hand needs can be handled by cash management accounts at one of the big financial institutions with cash in money market. Checking accounts are a lousy place to keep cash. At the minimum use Bank of America or similar with access to a linked Merrill Lynch treasury money market or similar.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#8Maybe focus more on turning a profit than burning millions on operational costs and endlessly raising cheap VC money every month?
That wil be the only choice going forward, that's for sure. No more cheap money for quite a while.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#9Earlier quoted context omitted.
Startup founders are usually not all that well versed in these best practices because it’s the first time they’ve been put in this situation and it’s a distraction from their primary focus to grow the business.
This company put $60 million into its deposit account at SVB. $60 million and they couldn't hire expertise? what about the VCs? Regardless of the risk aspect they were losing probably close to 4% on $60 million. But the risk aspect is not non-obvious. It's something every individual depositor having more than $250,000 is aware particularly after the 2007 financial crisis.
VC didn’t give them $60M to get a 4% return. They gave them that money to get 100’s% return, anything less and they don’t care.
Re: Silicon Valley Bank failure could wipe out 'a whole generation of startups'
#10Maybe focus more on turning a profit than burning millions on operational costs and endlessly raising cheap VC money every month?
That wil be the only choice going forward, that's for sure. No more cheap money for quite a while.
And my gut feeling is that our field is only going to be the better for it in the end.