If you want your investments to be guaranteed by the US governent, that product exists (US Treasury bonds) and it is popular. The yields are pretty low though. People with megabucks to invest who put it in something other than treasuries do that because they chose to accept higher risks in order to chase higher returns. Except surprise, now the risk is socialized.

No, people with deposits in SVB never faced having it all disappear. SVB was insolvent which meant that its liabilities were larger than its assets. That doesn't mean the assets were worthless. The FDIC process is like a bankruptcy. First, everyone gets restored up to the $250K insurance limit. Next, the remaining assets are sold off and the proceeds are divvied up among the uninsured depositors. So the depositors take a haircut: some fraction goes poof and they get back the rest. They don't end up empty handed. Figures like 90% (i.e. they lose 10%) were being thrown around this morning, before the bailout.

You don't have to be anywhere close to "omniscient" to understand the concepts of risk and insurance. Every layman knows about FDIC limits. In addition, these CEOs are backed and advised by resourceful VCs. Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash. Hubris or incompetence or both.

> Those VCs wrote checks into SVB accounts and apparently didn't care to give any advice about protecting those uninsured piles of cash.

Worse, according to others in the thread they had it in the contract that they must use SVB exclusively.

The CEO of a 10 person startup I could understand not being on the ball with this.

But not the CEO of a 100 person startup.

100 people is large enough to have a substantial amount of human time available for use, and likely budget as well.

You think the CEO of a 100 person startup should be worried about something like a bank run happening? It's not the 1920s. Most people don't ever consider that money in their bank could disappear for no reason.

Next you should tell me they should worry about "the big one" hitting Silicon Valley which we know the actual odds for and people still seem to live there.

> Most people don't ever consider that money in their bank could disappear for no reason.

Geez. Let’s hope you’re wrong. Financial illiteracy is bad news in a society built on markets.

I can’t speak for “most people” and especially not people in Gen Z, but otherwise, as a matter of fact, many people do think about that and manage their money accordingly.

Bull shit, 99% of people that use the banking system do not worry about bank runs.

Forget bank runs. Banks are corporations and corporations can fail. Very few people have cash above 250k. Financial advisors routinely advise protecting against bank risk by buying risk-free assets or using CDARS or equivalent.

Ironically, it kind of seems it may more likely for a consumer to protect against bank risk than for these startups and VCs that, despite all their resources and CFOs, apparently had collectively decided bank risk isn't a think for them.

Do 99% of people have more than the $250k in their account?

Of those who do, I wonder what the percentage of people is, who would be worried about that risk?

Maybe more than 50%? 75%? 80%?

> You think the CEO of a 100 person startup should be worried about something like a bank run happening?

Yes. Not specifically a bank run, but bank failure. Cash is the lifeblood of a company. Let's not worry about our cash becoming unavailable, in a bank that buys risky assets with our cash, in a perilous interest rates environment, "cuz it's not 1920."

And most of the feasible scenarios in which banks start collapsing so quickly and widely that depositors end up with barely anything left bar the FDIC insurance are scenarios in which the economic outlook is so grim your startup that's relying on rapid growth and further funding to survive isn't going to make it anyway.

Admittedly, picking a startup as a bank increases that risk somewhat, but so does picking a startup to provide your CRM system or web platform or other mission critical stuff that's a lot more likely to be shut down with minimal warning, or indeed choosing to raise funding from a VC that wants you to 20x or bust...

Just wow. "Money Saving Expert", a UK website which gives pretty decent advice for the average person in the UK mentions the government provided insurance limit for deposit accounts (£85,000). Anyone reading that site knows their money could be lost if they have more than the limit in any single bank (or multiple banks where a subsidiary shares the owner banks insurance).

But then again it doesn't really surprise me that an SV CEO would have no concept of deposit insurance. They live in a different world.

Does average person read the website?

No, a CEO of a 100 person company should be delegating stuff like this to people with expertise in such matters.

A startup CEO isn’t going to be an expert in everything, no matter how much some people worship them.

I'm just some jackass that knows about FDIC limits and how they (used to) work, and I'm as far from a CEO as I can be. I absolutely expect CEOs to be thinking about this stuff.

> Most people don't ever consider that money in their bank could disappear for no reason.

The $250k FDIC account limit was really well known, so I'd expect someone in the CxO ranks to have it properly managed in a 100 person startup. CFO maybe?

Several people have mentioned over the last few days that spreading $$$ across a bunch of ($250k limit) accounts at banks is a service offered by third parties, to address this very risk.

Wonder what the cost of using such a service would have been, and how many SVB customers were using it?

Anyway, with the current US regulatory approach of "oh shit, lets cover all deposits anyway" I wonder if those services have a future...

> It's not the 1920s.

Is that a good thing or bad thing? :)

  You think the CEO of a 100 person startup should be worried about something like a bank run happening?

Yes. A CEO should know where the money is, what the risks are, and how to handle them.

>> Next you should tell me they should worry about "the big one" hitting Silicon Valley

The big one as well as this banking debacle should both be on your radar, yes. You are in this for the money. You have money but you want to increase the amount by orders of magnitudes. So you gamble.

You gamble on lots of things so that you spread the risk. Gamble gamble gamble.

Hey, you know what? I sat on three different poker tables this evening. Lost all. I'd like my money back. Now, please.

Yeah the absolute degenerate gamble known as putting a check in a bank.

If a CEO of 100 person startup can't understand the concept of business continuity planning, what are they doing, exactly?

I'm a nobody who got some startup lotto monies that were in excess of FDIC limits. You know what I did? I used multiple banks.

If you are not planning for "the big one," you are, again, accepting risk. My parents did not have earthquake insurance in SoCal in 1992 and had to start thinking about how they were going to repair the collapsed chimney on our house. I also didn't carry earthquake insurance on my SoCal house, knowing full well it is a risk. My mitigation being stocking up on food and water and having alternative sources of heat.

Or perhaps “CEOs should hire a CFO”

Founders are often coming into new levels of financial responsibility when they get funded and as their business draws in later rounds of investment and customer revenue. You can’t assume $4M works the same way as $40k or your liable to lose a big chunk of it. Thankfully, there are professionals whose role is to help with that.

Or the VC companies that lent the money would pool resources and have one person handle a few smaller businesses using similar procedures to mitigate risk. Helping manage growth is part of what these companies are supposed to do and you'd think it would protect the investment (in a world where you thought the limit was actually $250k).

Oddly though, a thing I've heard repeated over and over is "it was in our covenant to use only SVC."

So many people in all these threads that are doing the Monday morning quarterback of startup founders and believing that they would have done things differently if only THEY had been the CEO.

Obviously the #1 top priority of the CEO of an early stage startup is to spend time assessing and countering risks such as bank runs, gross mismanagement at their bank, earthquakes

This is reducto ad absurdum. The kind of risk management that would have saved startups here is basic, elementary business. Parking money at treasurydirect, firms that handle this kind of thing as a service.

That is the standard as defined by law and to which all directors sign up to.

If you can't live up to that responsibility don't run a company.

If this leads to bailout then does it mean that taxpayers are effectively responsible for the CEOs decisions?

If they are not, then it's 250k left from every account and all else is lost. And someone could be sued for that. Who should it be if not CEOs?

The $250k coverage (per depositor) is also funded by taxpayers, right?

No, the FDIC is an insurance pool funded by its member banks.

CEO's should read the god damn bank agreement. WTF.

How does "reading the bank agreement" improve anything? Every bank has the same exact risk.

No. Every bank does not impose the same risk.

Regional banks like SVB have different regulations than other banks.

It's an impossible standard to hold founders to know that deposits are insured up to $250,000? This isn't exactly fine print. Just be minimally competent and not a clown.