Maybe I'm wearing a tin foil hat... are any of these VC's shorting SIVB?

No - if they got caught doing that it would hurt their reputation (and they'd have to do it with their personal money since VC funds aren't allowed to do such things). VC reputations are far more valuable than the money that could be made off this one trade. Additionally, if SVB was insolvent that would hurt any of their startups with cash at SVB - also detrimental to them

the sum of their incentives make it very improbable

"Hey, Some wierd stuff is going on at SVB. I'm short the stock. I suggest you get your money out."

No tin foil hat required.

Big ongoing discussion about Silicon Valley Bank: https://news.ycombinator.com/item?id=35086836

Why?? Banks are *VERY* safe.

Looking at the FDIC website:

> The FDIC does NOT cover (even if purchased at an insured bank):

    Stock investments
    Bond investments
    Mutual funds
    Life insurance policies
    Annuities
    Municipal securities
    Safe deposit boxes or their contents
    U.S. Treasury bills, bonds or note

This article is about the bank's bonds, if I read it correctly. Safe for a household does not mean safe for a company that lives on investment money.

There's an equivalent for securities, the SIPC. It's capped like FDIC insurance is, but bonds/stocks have some protection in this regard.

https://en.wikipedia.org/wiki/Securities_Investor_Protection...

Ah, I see. Looks like it still only has a limit of 250,000 USD, which seems low for modern business. How far would that get some of these companies?

Aren't most (all?) of those clearly owned and register to the individual regardless of which bank holds them? If the bank holding my stock goes out of business, it is still my stock. It doesn't just evaporate with the bank unless there is some fraud involved. Some other bank will swoop in to buy those accounts and my stock will move there.

The main concern here is likely less about straight-up losing any of those investments and more the huge headache that comes with being unable to access your money while the whole process plays out.

The bank can take your cash deposits and invest them, which is the problem occurring with SVB. In this case, your deposits are still insured via FDIC.

If you buy investment products from a bank, and they hold those for you, those are not insured via FDIC.

Speed, if all your money disappears tomorrow you may miss payroll while you're waiting for the FDIC to get you your money.

There is a legal process to get your money, so you can guess that this is not going to be quick. I remember stories about this after 2008.

Bank collapses cause disruption, and potential loss of balances over the FDIC limits. A well-funded startup really doesn't want their money in a failing bank.

One can imagine that a startup might have more than the $250K FDIC limit in the bank. I think that's what they're being advised of: Get under the $250K limit ASAP.

Also multiple banks might be under one FDIC account so you have to check that too

Most portfolio companies have more than the FDIC limit. My preference is to have 2-3 months in cash, the rest in commercial paper (which would not be threatened by the bank failure, but did "break the buck" in 2008). In the early stage 2-3 months of cash is much less than the FDIC limit, but later on that could change.

I've been using SVB since the mid 90s, but most recently chose First Republic instead. FR poached some of the great SVB people anyway so it wasn't a huge change.

FWIW, SVB got into trouble in the 80s due to their real estate practice. They stuck to their knitting after that (except they kept their wine practice, which is small and I guess amusing) so I find this situation rather interesting.

You mean the great people who moved to FR poached you away ;)

Well, they're safe until they aren't. Bank runs have happened, and more of them will in the future. Nothing is 100% although using banks is probably the safest storage for funds, if you compare...

In September 2008, I was in Amsterdam for a conference. I remember waking up and seeing a TV in the hotel lobby with the cable news headline about the receivership of Washington Mutual. It was a little bit of a strange feeling to realize that when I had left California I had personal and business accounts with WaMu — and when I returned to the US, my accounts were all with Chase. For what it's worth, it was a seamless transition. I don't remember any hiccups with accessing cash, using debit cards, and so on.

I like how every time I look at this and assume that the market surely must have internalized this information by now, an hour later the stock is down another 15%.

Why would VC firms urge their founders to all use the same bank in the first place? Seems like a recipe for Bad Things™...

(I assume the answer is some combo of laziness and kickbacks and old boys club and such...?)

In bad times (like covid/recessions), SVB has extended lines of credit to many VC-backed startups.

It's been a mutually beneficial relationship for 40 years.

not ..completely. startups have a slightly different profile than normal businesses, and SVB is well-oiled machine for working with them. maybe its more charitable to say that they have specialized?

To me that just seems like another reason, if you're someone backing multiple startups exposed to the overall health of the ecosystem, to point people to different options so you don't have a single point of failure.

Surely there are enough banks and bankers around that you could have half a dozen or more specialists? It's knowledge work, not something needing billions in physical infrastructure investment.

The NY Fed looked at lending specialization actually improved Bank lending performance https://www.newyorkfed.org/medialibrary/media/research/staff...

This has to do with deposit specialization which I don’t know if it’s been studied, but you could see the same arguments applying to.

If you're an individual startup, you don't care about the overall system, just maximizing your own. So that efficiency seems great.

But if you're a VC with a broad portfolio, you're much more exposed to the single-point-of-failure risks that come with increased efficiency.

"Give up some efficiency for system robustness and long-term-health" is a no-brainer for mature engineering orgs, but in this financialized world nobody can see the longer term big picture

When there is a run on the bank selfishness becomes a virtue. Those that exercise restraint and take the high road of not contributing to the panic are often the ones who end up losing the most.

National bank runs start with one bank.

Good thing payroll draw is tomorrow for 15th.

Confirmed - fund told us to pull out. I heard A16Z told their port-cos to stay.