>Although there are almost 5,000 banks in North America, only a handful focus on startups, despite the importance of software, biotech and clean technology to the future of our economy, health and environment. While traditional commercial banks will only lend against “hard assets” or your personal guarantee, people such as me or SVB’s team have spent decades building the expertise to provide debt capital based on the value of your “enterprise,” taking into account your company’s IP, revenue or both.
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>When these startups approach a lender, they’re rarely profitable. That lack of profitability often scares both bankers and regulators. And yet, as SVB and other lending teams have proven across multiple economic cycles, loan losses in this sector are no higher than those in the broader economy – provided you have the right expertise.
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>SVB recognized this market gap and became the 16th-largest U.S. bank. As memories of the last dot-com bubble waned, SVB’s success spawned a few smaller competing banks. If you were an entrepreneur, you welcomed the new competition and the lower cost of capital that resulted.
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>...
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>But no competitor can do in five years what took SVB decades to accomplish with its 6,000-person team. Over a 40-year period, SVB built a US$30-billion loan portfolio, and about half of that capital is already at work in the economy. SVB has also deployed another US$40-billion in support of venture capital, infrastructure and private equity funds for their day-to-day business needs. That capital and know-how helps create thousands of new, high-paying North American jobs each month. All of which came to a screeching halt last Friday.
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>With the loss of such a large debt partner, many VC funds will need to reserve more of their own capital to fund each and every new startup. Which means these same VCs will have no choice but to back fewer new firms. And fewer new startups means there’s a irrefutable risk that the “next Moderna” won’t get that first round of essential funding. The consequences of this single bank failure are difficult to overstate.

This kind of concentration of capacity within one organization and market dominance is a problem not just with finance but with any other critical pieces of business infrastructure. They become critical points of failure when things go wrong, and as we're seeing now there can be significant widespread damage to the ecosystem because of it. There ideally should be a degree of redundancy built into all of these systems, so that in the event of a failure there can be sufficient capacity to keep things going during the rebuilding phase.

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Lol. "As svb has proven",. "Svb has the skills ". , ummm aren't they bankrupt , /jk as I think it's only partially related

“No bank will ever handle large sums of money for startups” is peak bailout-seeking bullshit.

Replace all profit-oriented banks with regional credit unions

For years, low interest rates led to an environment where too much capital was pursuing too few opportunities. This is no longer the case.

The startup world has always been subject to boom and bust cycles, and this is a feature not a bug. Tough times force entrepreneurs to get creative and adapt, which in turn helps lead to innovation.

It's no coincidence that, historically, some of the most successful startups get founded during or just after economic downturns.

This article is emblematic of just how fat and lazy "Silicon Valley" has become. SVB's failure will present challenges, but it is also an opportunity.

If people like the author of the article are not up to these challenges, they should just pack it up, go home and let the people who are get to work.

Sounds like a job for a startup bank.

But who will finance bullshit ideas now?

Jimmy down on the corner is willing to spot you a 20 for a price.

While they did invest in too many long-term bonds, any bank that got hit with a bank run worth 30% of deposits would also fail spectacularly. The reserve requirement is only like 10%.

What an absolute crock of shit from tip to tail.

Yeah this is the framing they are trying instead of actually dealing with the fact that this would not have happened if republicans werent so drunk on bullshit.

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Lets blame wokeness, women executives, anything outside of bullshit lax policy instituted by unserious and clearly stupid politicians who have no idea how any of this really works.

If SVB is dissolved, and if any of those 6000 people are actually experts, that expertise will be seeded throughout the industry and provide opportunities for those skill sets to be spread among their new teams. If.

And that 30% run was triggered by techbros who want to kill banks...

Banks usually have a concentration cap on deposits to prevent any small group from becoming able to kill the bank. But Thiel and them were left unchecked.... prolly cause SVB had no Chief Risk Officer (apparently), and instead focused on having things like a Chief Diversity, Equity and Inclusion Officer.

A 30% run would kill most FIs. Interestingly, some jurisdictions/FI ecosystems have/had ways to deal with it -- though regulators have dismantled those mechanisms. For example: Canada's BC Credit Union system used a pooled liquidity system for decades. Liquidity reqs between CUs and Banks in Canada vary, but generally CUs need 11% banks need like 6%. What CUs used to do with their liquidity pooling, is they'd all store their liquidity with a central trade association (Central1). There's around 50 or so CUs in the province still, though that number shrinks all the time. By pooling their liquidity, all peers of a like size/smaller size, would generally be 'fine' if there was a run on any one institution -- a run on a $200 million CU doesn't mean anything, if the pool has $1b from 50 like-sized participating CUs. They also paid into CUDIC, which is/was another fund specifically for providing deposit insurance if any CU did go under.

The regulators basically destroyed most of that, and they had the ability to do so in part because BC offers 100% deposit guarantees -- which means the government calls all the shots. The regulators demanded that CUs stop pooling liquidity, and instead assign it to individual institutions. They also strongly encouraged/pushed CUs into entering the bond market... which as we've seen, worked out well for SVB. The regulators basically demand that the CU system, which was setup to offer an alternative to banks/bank structures, behave like banks...

> It's no coincidence that, historically, some of the most successful startups get founded during or just after economic downturns.

I think part of the reason for this is that people get laid off and suddenly don't have to do whatever stupid idea their boss told them to do. Now they get to work on their own stupid ideas.

> prolly cause SVB had no Chief Risk Officer (apparently), and instead focused on having things like a Chief Diversity, Equity and Inclusion Officer

as if they couldn't do both. One has zero to do with the other.

Not just that, they don't want regulations to clamp down again in response to this. So they're pivoting to "oh shit, we stepped in it, but we'd rather pretend everything's OK than have regulators step in, because I want easy, free money for my next startup."

This is what happens in an environment where people can fail spectacularly and still walk away rich and personally unaffected. They just look for the next grift.

Still waiting for my Therenos results. Not holding my breath.