[frankchn]

Venture-backed startups are weird in terms of cashflow compared to traditional businesses.

They appear out of thin air with no history and millions of dollars. They then constantly burn money in the tens to hundreds of thousands of dollars a month until they disappear or get injected with millions more dollars. Often, traditional banks don't know how to deal with these entities and it sets off tons of alarms in their fraud and risk management departments.

SVB and related departments know the business and financial models of startups a lot better and are more willing to help.

[twelve40]

i really wonder if that was a problem. My last startup banked with Wells Fargo for a while all the way from pre-seed to A, and it seemed to be fine. Anyway, my number 1 ask from any bank is not to fail, before anything else, and that didn't really work out great here. If SVB was a top-5 bank it probably would have been bailed out by the govt. Not great, but probably safer for the customers.

[bloodyplonker22]

This makes complete sense, however, why would big banks not want to compete against SVB by establishing a smaller division that handles startups? Obviously, the market is small compared to their usual markets, but there is still a lot of good money to be made.

[eastbound]

> why would big banks not want to compete against SVB by establishing a smaller division that handles startups?

Because such startups tend to, when they can’t raise funds easily (=nowadays), withdraw all their cash deposits at the same time (=what’s happening at SVB), which puts it in bankrupt. So, small market, but so much variance in deposits that it’s risky.

[icelancer]

Bank of America couldn't care less about our XX million/year revenues. Literally wouldn't take even basic requests for services. We moved to Keybank who has a much better rep with small businesses, and service (and pricing) has been orders of magnitude better.

I'm assuming a similar thing was going on with SVB vs. other large banks.

[frankchn]

If the deposits are going on the parent bank's balance sheet, it would be subject to the same controls.