| HN Mirror

At the same time, these startups all had a CFO whose job was to manage that financial risk. What if they had a late payment from customers or a supply chain delay, or were simply locked out of their accounts due to a cyber event or unavailability of a key employee? Did they have any contingencies like line of credit or instruments outside SVB? They took other risk reductions like insuring their office space, etc.

In addition every offering and statement from SVB shows >$250k is not insured but they treated it like nothing bad could ever happen there. Even your average retiree knows their life savings in a bank is only covered to FDIC limits.

This risk for businesses with cash is not new. Financial services like sweep accounts, negotiable instruments, etc. existed for decades. Is it just that SV entrepreneurs are too smart or not smart enough to manage these risks? Or was it the VC firms that forced their hand by requiring them to bank at SVB (noted as a VC funding requirement by others on HN).

The companies can sell their invoices or ownership of their deposits on the market, or use it as collateral for recovery. The CFOs job was to manage financial risk. They failed at this and their companies are at risk because of it. The FDIC takeover means they have unfettered access to at least $250K as of today, so it’s not quite as bad. And the FDIC will unwind SVB’s current assets through their insurance trust or by finding a buyer. The SVB stock and bond holders will lose, the depositors will lose much less.

But it makes you wonder how long the C-suite knew this liquidity issue given they had no risk manager for most of last year (also noted in other HN articles).