Ask HN: How is the SVB situation affecting your startup?

[simonebrunozzi]

It's no news that Silicon Valley Bank is experiencing some trouble.

Since most startups in the US bank with them, would you like to share some details of your current situation?

[Lightbody]

Disclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess.

We were reluctant to move our funds most of the day yesterday. Felt like a lot of dumb panic. We had emails from a few investors, most saying "stay calm" but one saying "move your money to this bank that I'm invested in!" ugh.

We decided near the end of the day to move at least half our funds (in a money market) out, but by then it was too late to initiate anything. Now we're finding this morning nobody at SVB is returning our calls. We are able to log into the online portal just fine. So not sure if/when we'll be able to to move anything.

Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line.

Note: I'm still not actually worried that our money will evaporate permanently. But I can definitely see a situation where it is inaccessible for several weeks, causing issues with payroll and operations. I expect worst case a large bank will swoop in last second and buy all the dumb investment vehicles/bonds for pennies on the dollar and then our access to cash will come back.

[gizmo]

When assets << liabilities nobody wants to buy the bank. Especially when you don't get any time to do due diligence.

This isn't just a liquidity problem, this is a solvency problem. The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment.

Your cash isn't at the bank anymore. Your cash has been invested in bonds and those bonds are now worth less than the number you see in your bank account. That's bad.

[ak_111]

May I ask you why do you sound so calm and confident that your money will not evaporate permanently (above the FDIC guarantee)? Banks going bust is a totally normal thing in a capitalist system, and bigger more established banks than SVB have done so only a decade ago.

[time_to_smile]

> Felt like a lot of dumb panic.

A lesson everyone should have learned from the toilet paper scarcity crisis during the pandemic is that it doesn't matter if it's rational or smart, if you want to keep your ass clean make sure you're in the front of a line when people are panicking.

You could make a pretty compelling argument that the last decade the entire tech sector has been propped up by "dumb exuberance", but people aren't complaining about the money they made during that period.

[Lightbody]

Well this comment aged well

[justin66]

> Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line.

On the bright side, Ronnie James Dio wrote a song about your current predicament.

[sritam7]

I guess you were right - In historic last-minute deal, HSBC acquires Silicon Valley Bank UK, says all depositors’ money is safe

https://techcrunch.com/2023/03/13/in-historic-last-minute-de...

[eqmvii]

CNBC (live TV) is reporting efforts to raise capital have failed and deposits are fleeing faster than talks about a sale are proceeding. Lots of reports that its online banking systems are "down" or suspended.

IMO there's a very good chance the bank enters FDIC receivership by Monday, and there may not be room to maneuver much anymore.

Edit 10:05 am eastern: David Faber live on CNBC says he's hearing deposits are flowing out too quickly for a sale to be negotiated. Quote: "That may "set up something else" over the weekend"

[BasilPH]

We only have an SVB account because of Stripe Atlas. Back then (2020) SVB was the only option, they hadn't added Mercury yet. I wonder if you still get SVB as an option today, or if Mercury is the default.

I got annoyed with SVB because the online banking feels from the 90s and they charged fees that I found excessive. Switched to Brex a while ago, and never looked back.

I was planning on closing our SVB account for a while, but didn't get around to yet. Now it seems like it might close itself. I wonder what the process will look like to get the $300 back we had on there.

[sgammon]

I just went through Atlas in 2023. SVB was still an option, but we went with Mercury, thankfully.

[lolinder]

> most startups in the US bank with them

Is this true? And if so, how was this not a major red flag for investors earlier?

From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no?

EDIT: People have clarified that the bonds are the big problem on the assets side, not the loans. They had a bunch of low interest rate bonds that now have to be sold at a loss because interest rates are much higher.

[karpierz]

The issue is not that SVB has loaned too much to companies that can't pay it back.

The issue is that SVB took in a lot of deposits in 2021-2022, and locked them into 10 year bonds at 2.5% interest. Now in 2023, a lot of their customers are burning money (withdrawing funds) and aren't raising money (depositing funds), and so they need to start liquidating the 10 year bonds.

The issue is that the 2021 bonds are discounted because interest rates have grown since, and they're out some money unless they can hold the bonds to maturity. So they're raising money to bridge the deficit to allow themselves to hold more of the bonds.

[gizmo]

It was a major red flag! You're right about their liabilities, but their assets are mostly longish duration bonds. When interest rates go up their main customer base (startups) will have a harder time raising money (bad for them) and the value of their bonds will go down (because new bonds offer more interest). And now they're forced to sell these bonds at a loss to cover the money outflow (customers leaving). They're deep in the hole with no way out.

Basically SVB failed basic risk management, and they deserve to go down. You can't promise your customers they can take their money out at any time and then turn around and invest that money in longer duration assets you can't liquidate. Just irresponsible.

Execs selling millions worth of shares in the past weeks is also classy.

[kasey_junk]

SVB has an extremely low loan to deposit ratio (~.45). Most of their assets are in the form of treasuries, bonds, etc.

Depositor concentration is definitely high but that’s not particularly uncommon in banks (though for one of this size it is). But that concentration is what fueled their growth as well.

[tommoor]

VC's are generally the ones that actively promoted SVB to their investments. There's literally a branch on Sandhill road.

[riseagainst22]

This is true. most startups are trying to bank with the company I work at now and switch from SVB to us, it is a fucking panic and some of these companies are trying to send us 100's of mill cash in hand

[paulddraper]

> Is this true? And if so, how was this not a major red flag for investors earlier?

The red flag being......?

There is nothing per se that makes this situation unique to startups.

This would happen to any bank that (1) made bad investments (2) caught the public eye.

[adamsmith143]

What could possibly go wrong running a bank by working with the most volatile companies on Earth with failure rates above 90% lol.

[jtarud]

I think this thread will have tons of views from people in the startup world that are likely to be SVB customers. If we all agree to not do run in the bank, it will improve chances for SVB to make it through the next few days.

I'll start with committing not to withdraw money my company [redacted] holds in the bank.

We stand by SVB.

I invite others to do the same.

[huhneverthot]

Oh man I actually laughed out loud at this. I don't think your HN comment is going to do anything in the face of the classic prisoner's dilemma.

[nscalf]

Oof, absolutely terrible idea. The first priority always has to be making sure your business survives. You’re doing a disservice to your investors and employees.

[orf]

I guess it’s kind of sweet and innocent to have such faith that a group of disparate people would act against their own self interest for only a nebulous future “common good” outcome, and that would be sparked by a comment on an internet forum.

Makes me feel kind of jaded to be honest. But maybe that’s the problem with society. Maybe we all just need to band together and not be swallowed by despair. Screw it - I also pledge to not withdraw any of my 0$ from SVB.

[mrelectric]

I wouldn't share my company name in this context.

[riseagainst22]

I work at a bank most people are trying to park their funds at. It is a fucking PANIC mode disaster for them. Large companies in the Valley are trying to dump 100's of millions into our accounts

[graderjs]

Can you explain, with a focus on how banks and money movements work, why this is a disaster? I'd assume this would be Christmas--Best day of the year, for a bank accepting migrating customers!

[idlewords]

I'm more strongly affected than I thought I would be, as all the giggling and schadenfreude is distracting me from my work.

[calmlynarczyk]

We're under the FDIC threshold in our account at the moment, so we are just riding it out expecting to get fully recouped in case of bank insolvency. We're looking into additional lines of credit for the short-term in case we're locked out of our funds for an excessive length of time.

It sounds like it's too late to withdraw anyways, so all their customers can do at this point is exercise an emergency plan and line up options for short-term liquidity.

[bratao]

Every single founder I know in Brazil who has an SVB account has either withdrawn their funds or is attempting to open another account with a different bank to do so completely.

[hugs]

No plans to move money out. But definite plans to create a new, additional account elsewhere and when payment for current orders in process comes in over the next 30 to 60 days, have those new funds go into the new account. (Basically, diversifying is good, and I shoulda/woulda/coulda done it sooner, but it was never my top priority... until now.)

[hugs]

This didn't age well. So... Definite plans now to move 100% of my money out. Thankfully, I'm within FDIC limits.

[PaulHoule]

Odds are the San Francisco Fed has been working overtime since last night and announce SVB is bought out by another bank this weekend.

[JumpinJack_Cash]

Can we stop for a second and comment on how tailoring a bank to startups is a bad idea?

You don’t get any exposure to any of their potential hyper-growth in the form of debt/equity.

All you get is the deposits but they also don’t grow, the total just becomes concentrated in the accounts of the few survivors while all the other accounts go to zero as most startups die.

[blitzar]

It is an excellent customer base for a bank. Startups are going to burn at a fairly moderate rate, such that you have a fairly good idea of the cash flows you would face in the normal course of business - it wouldn't take the most advanced Ai in the world to know for every startup on your books what their cash flow out will look like for the next 12-24 months.

By also being tied into the valley and the big VCs you have a fairly consistent stream of new accounts and large deposits throughout the year.

[ak_111]

It is a great idea in a 0% interest world, SVB's stock price went from $24 in 2010 to $710 in 2020.

[ghoomketu]

I have about $1800 in it as I was forced to open an account with them for Stripe atlas. It was a bit more but I think they deduct $25 / mo for the past 3 years. Not really using it since Stripe started in India recently.

From what I understand since my amount is low I don't have to really do anything. Is that correct? Any advice for me?

[bhouston]

I think that the bank gets rescued, probably very soon, the next few days.

To let it fail will harm a significant portion of the US startup community and damage the country's ability to continue to innovate. In many ways, it is too big to fail because of its ties to the startup community.

I think there is no other solution right now be a federal rescue of SVB. It is likely insolvent right now if they had to sell their assets at firesafes prices. An orderly unwind would help all involved and preserve a lot of value.

[browningstreet]

I'm SVB adjacent and all my employee stock purchase investments are under water, and they weren't a few weeks ago.

[danpalmer]

Stripe Atlas has supported SVB accounts for a while. I believe it may have been the only bank account supported at the beginning, but regardless, I suspect there are a lot of Atlas companies backed by SVB accounts.

[welder]

Only for C-Corps, LLCs created with Atlas never used SVB.

[more_corn]

Oh man, nobody should ever use Stripe Atlas.

[NickC25]

I own put options that I bought yesterday at market open. It's not affecting my startup, but it's affecting my portfolio and I'm not happy that I can't sell those options.

[idopmstuff]

Why can't you sell them?

Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.

[rr808]

Ring your broker. You can probably still execute the puts and you'll be short.

[gerad]

Since yesterday afternoon, I’m unable to log in to the website and the mobile app is down. I haven’t had to make any transfers yet, but I’m hoping and expecting that will still work.

[trialect]

I'm sorry... when did hackernews became SVB news?

90% of my feed since yesterday contains the word SVB from hackernews.

Is this some kind of US thing? Can we just move on to other things?

[MacsHeadroom]

HackerNews is a service by and for the venture capital company Ycombinator. 30% of Ycombinator backed startups use SVB bank, most of them to run their payroll.

So no we can't move on. The livelihoods of the people who this site was made by and for are at stake. They aren't even getting their paychecks this week. The entire venture capital and tech startup industries are immensely affected.

[b20000]

they never returned my calls as a self funded startup so fuck them

they are trying to raise money? that’s cute, maybe they can create a pitch deck and be ridiculed a million times just like all of us

“you need a team” “come back when you have revenue” “we need to see more revenue” “that market is too small” etc

but you know what? they got buddies and you don’t as a founder

[graderjs]

Well, "fuck them" is not "fuck the bank"-- the bank is just a ghostly outline of all the other people's money they contain. So really, you're saying "fuck you other people!" -- maybe that's not your intent! If so, think carefully before you reply next time! :) ;p xx ;p