When your founders’ butts are on the line, don’t be loyal to a bank. Be loyal to your founders.
That’s my biggest lesson from the chaos at Silicon Valley Bank. SVB was just shut down by the FDIC.
Companies could lose deposits above $250,000. From Bloomberg:
Uninsured depositors will get a receivership certificate for the remaining amount of their uninsured funds, the FDIC said. As the agency sells off Silicon Valley Bank’s assets, future dividend payments may be made to uninsured depositors, according to the statement.
Though losses are possible, I think it’s unlikely.
When Washington Mutual failed in 2008, no one lost a dime. WaMU accounts simply became JP Morgan accounts.
I think the same will happen here.
What pisses me off the most here is major investors who told their founders to stay in SVB. I won’t name names, but some heavy hitters gave this poor advice.
As usual, Founders Fund knew better. They advised their founders to pull out of SVB.
For the record, so did I:
The issue here is asymmetric risk. If SVB had stayed alive, you just keep your money.
If they fail, you could lose it.
So there’s little or no upside to staying with SVB. But there could be a massive downside.
And here we are, on that downside.
In talking with founders, I find most early stage companies are using Mercury anyway. Mercury’s strategy of spreading deposits between banks seems wise:
Mercury looks like a solid choice. But ultimately, the safest banks in a time like this are the biggest Too Big to Fail institutions.
That’s banks like JP Morgan, Citi, and Bank of America.
Best of luck to all founders dealing with this difficult situation. If there’s any way I can help, never hesitate to ask.
More on tech:
Everything You Always Wanted to Know About Venture (But Were Afraid to Ask)
Get the blog before anyone else…subscribe!
If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog!
Save Money on Stuff I Use:
This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.
More on Fundrise in this post.
If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!
I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!
I wrote a detailed review of Misfits here.
Use this link to sign up and you’ll save $15 on your first order.
Photo: Peter Thiel’s Founders Fund got it right, as usual. “Peter Thiel” by jdlasica is licensed under CC BY 2.0.
Tremendous 
3 thoughts on “SVB Fails”