[luckylion]

Bank offers you very favorable rates for cash, better than competitors.

You put lots of cash into bank account, "what could go wrong?"

Bank implodes.

Federal government bails you out and goes to collect the money to do so from other banks who offered more reasonable rates and thus didn't get your business.

[jnwatson]

They didn't offer interest on their deposits.

[rottencupcakes]

Can we all just be reasonable here? There is no black and white.

SVB clearly offered services that other banks couldn't or wouldn't provide - whether that be loans, credit cards, interest, or anything else.

They clearly fought to not be subject to specific regulations that bigger banks were subject to.

Was every depositor thinking about all this when choosing their banking decisions or were they just going with the bank their VC recommended? Probably the latter, but there's definitely some wiggle room here.

[gusgus01]

Elsewhere it looks like SVB was required to be used as per other commenters in this thread: https://news.ycombinator.com/item?id=35129692

So yeah, not a better interest rate but the ability to get a venture debt line at all was predicated in banking at SVB.

[mikeyouse]

Exactly right, these were mostly just people wanting a place to pay vendors and payroll. Millions of dollars in 0% interest checking accounts.

[luckylion]

I should've said "terms", I suppose. They were offering package deals where you have to exclusively bank with them and in return you get below-market loans, line of credit and potentially investments, and allegedly also for your personal financing needs. Give all your cash, accept the FDIC-limit risk, get favorable terms in return.

Why else would anyone put all their money into a single account, and why would VCs even enforce doing so contractually?

When someone offers you something the market doesn't, you should understand that there's risk attached, especially when you're a company with millions or hundreds of millions in cash. When someone falls for some crypto "18% per year, no risk" scam, that's how we view it.