was
1yr ago
It's not the lack of cash, it's the timing of it.
Directors of a company are criminally liable if they ask people to work knowing they have no means to pay them. Wednesday is March 15 (payday, for work done March 1 - 15). That means companies unable to make payroll #2 in March need to furlough or have layoffs before start of work Thursday.
How many will be able to secure funding from VCs (who may themselves have funds tied up in SVB) before Thursday?
was
1yr ago
It's more a historical thing. 25 years ago, when startups were less of "a thing", a lot of traditional banks didn't approve a startup account because the below looks really weird if you're used to servicing traditional businesses.
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Someone with no commercial history or credit
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Who wants a credit card
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Then who one day deposits millions of dollars
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And the next months dollars get sent out and the bank balance goes down
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With minimal consistent income
These days it's more that you ask some random person in the startup world, VC, or lawyer, and they go "yeah, a plurality of the people I know use SVB" and that's not where you spend your precious hours as a founder trying to differentiate your company so you just go with the flow.
Though, next week every single founder is going to be taking money out of First Republic, Citizens, Fifth Third, Capital One, BNY Mellon, etc. and wiring it straight to JPM. I suspect there will be a broader bank run.
was
1yr ago
If the FDIC or other banking entity does not cover deposits, any business that depends on SVB and has a > $125K bimonthly payroll will have to do furloughs or layoffs. That's basically any business above ~15-20 people.
Directors of a company are criminally liable if they ask people to work knowing they have no means to pay them. Wednesday is March 15 (payday, for work done March 1 - 15). That means companies unable to make payroll #2 in March need to furlough or have layoffs before start of work Thursday.
There's something on the order of 1,000 series A or higher deals per year (even in 2022, decreased from 2021). The average time between raises is about 2 years. Thus, conservatively there's something like 2,000 venture-companies that have > $125K bimonthly payroll, and many small businesses that use SVB but are not venture-backed are not counted in this.
SVB purportedly services 50% of all startups per their advertising. From a survey of my VC and startup friends, it seems reasonable to assume that 25% of that are extremely dependent on SVB (e.g. payroll, no cash sitting elsewhere, and incoming customer payments aren't going to cover anything).
If these assumptions hold, we're looking at around 10% of the entire startup ecosystem laying off effectively everyone in March (e.g. either by going under, or reducing headcount so drastically that they're cashflow positive... which for most startups would be extremely painful). Another large batch will effectively go under in April (e.g. they have one months' payroll at another bank but that's it).
So in the short term we're talking about somewhere on the order of tens of thousands of jobs. A lot of future value creation is lost. Sure, some of these startups are the Juiceros or latest crypto scam, but others are meaningful companies that provide meaningful services. The latter group typically doesn't get as much press because they're optimizing for value rather than hype.
In the medium term, if you're a business that requires having an account with a >$250K balance, why would you now use any bank other than JPM? Sure you can do "diligence" on your bank, but SVB had an A rating from Moody's and a "buy" rating from JPM. Now obviously those are bullshit but for anyone claiming that this collapse was obvious -- please share a screenshot of your brokerage account where you made tons of $ shorting SVB.
So the default will be to go with JPM, rendering most small and medium-sized banks uncompetitive.
At the end of the day, SVB's shareholders will (and deserve to) get wiped out. Their bond creditors and such will mostly (and deserve to) get wiped out. I am not for bailouts of either of those parties. And maybe how we think about the banking system where depositors are creditors should be re-interrogated, because who the fuck is wanting to risk all their money for like a 0.5% interest rate? But I do NOT think startups and small businesses deserve to be randomly decimated.
was
1yr ago
One cause of the IQ-denier (and extending beyond that, denial of racial differences in IQ distribution) fallacy / fantasy is assortative socializing.
Lots of top-tier VCs don't subjectively think IQ is a strong selector because -- by the time a founder gets to Series B, they've been pre-selected for high IQ (1).
Lots of CEOs don't subjectively think IQ is a strong selector because -- by the time they interview someone for an executive position, that person has already been successful and thus has been pre-selected for high IQ.
You don't even have to be that high up. If you're an engineer at Google, your friend group and work group are probably all people who are fairly high performing individuals. So you might notice that there are fewer black people in that group, but the black people that you do interact with probably feel about as smart as everyone else (2)
Conversely, in my experience, if one talks to ER doctors, cops, public school teachers, or other people who are exposed to relatively large and relatively random slice of society, and one is really careful not to use the words IQ and wait until they've had a couple drinks, each of them will readily attest that some people are just plain smart and some people are just plain dumb.
1 - Or at least high enough to come off as quite smart in a superficial conversation not in one's domain.
2 - Not really true when I talk to non-woke people, but for the woke, at least smart enough that it's easy for them to dismiss any differences as those of education or environment, etc.
was
10mo ago
It's not super clear to me that a decaying body releasing gases (while in a tight container) actually extends the breathable atmosphere meaningfully for the remaining occupants.
was
1yr ago
Google Maps -- outside of the U.S., restaurant reviews (which derive from that) surpass Yelp.
Google Drive -- at our company of about 100 people we no longer routinely use Microsoft Word, Excel, etc. (granted, most of the executives and salespeople still have Microsoft licenses as they may need to send a Word or Excel document).
Android
Chrome
I don't know if that any of the above are "super successful" relative to Search, but then very few things are. But that's the core of their complacency -- anything they build gets compared to a trillion dollar, 90% margin business. For example GCP is a clear miss on a relative scale (relative to AWS and Azure) but still would be a multi-billion dollar company in its own right.
Granted, there are a lot of total whiffs too.
To explain this relationship further to the layman audience, let's say the interest rate (which is directly related to yield) on Treasuries is 0% (and for simplification, that's the only other investment option, and the market doesn't price in any potential for that interest rate to change), and you buy a $100 bond that promises to pay 2% interest over the next 30 years. You're buying the bond and anticipating getting $182 at the end of 30 years!
The day after you buy the bond, the interest rate on Treasures gets raised to 5%. Now, in order to get $182 in 30 years, someone can just buy $42 worth of Treasuries today. So your "bond" is now worth less than $42 -- because why would they buy your bond when they could buy the Treasuries instead?
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