Posted on 03/11/2023 12:09:25 PM PST by EBH
Only imbecilic incompetent startups would do this. The more VC money you take in, the more you dilute the worth of your OWN employee shares in your startup. I've never seen it.
Lavish food spreads,
There is food, to be sure. It's a cheap way of getting engineers to work morning, noon, and night on projects critical to getting the company to revenue.
private jet flights, exorbitant salaries and compensation
You have to attract superstars that not only can hit the ground sprinting, but also attract other great talent. That takes larger salary and compensation - FOR THE SUPERSTARS. Without the superstars, you have no breakout product, or can't execute to bring it to market.
But "regular", hard-working execution engineers are also hired - usually at a lower than normal salary, with stock options as enticements - they take the risk that the long hours and lower salary will pay off via IPO or company purchase.
for still unprofitable companies.
Yes, they're startups. It's an amazing horrible fight to get to revenue at all, let alone profitability. That's why VC and Angel investors exist.
Forgive me if I don’t feel sorry that they “can’t make payroll” this week.
So the ability of regular people to get the paychecks they were promised, so they can pay their mortgage and other bills, is beyond your empathy. Nice.
Just curious - what abacus are you browsing FR on?
-Yossarian
(Silicon Valley Survivor)
I’m still not sure how this is a crisis. A report I saw yesterday indicated that SVB had $220 billion in assets on its balance sheet at the end of last year.
“How many of these startups” are run by woke crazies?
Their anti-white anti-straight hate has ruled the day—until now.
Karma time!
Maybe a founder that ALREADY made a lot of money before joining that startup MIGHT take a private jet - but that's their own fortune at work.
Trust me, getting a startup to spend extra money is like pulling hen's teeth!
Part of the problem is that it’s impossible to do this during periods of rapid changes in interest rates. That’s because retail banking — especially mortgage lending — is one of the few areas where the rules are rigged in favor of the customers and AGAINST the banks.
Case in point … There is no such thing as a fixed-rate mortgage. Sure, you can sign a mortgage with a 30-year amortization at a fixed interest rate. But you can always refinance that mortgage at any time. The lender doesn’t have this option. So at a time like this with rising interest rates, you have banks or mortgage bond holders sitting on mortgages like mine (less than two years into a 30-year mortgage at 3.1%) while the prevailing rates on mortgages have climbed up to the 7% range.
I have an open offer to my bank. I will pay the entire balance in full if they will accept 20 cents on the dollar. :-)
“I’m not sure just how ‘woke’ SVB is/was”
Well—we can fix that—I mean, what are FRiends for?
https://www.svb.com/about-us/living-our-values
They were “agents of change”.
Make sure you read their ESG report to learn more!
(Short version—woke zombies—the world is a better place today with them gone.)
As for any “conservatives” who work there, they have been hiding under their desks in terror for fear of being outed and canceled.
The dumbest people in the world are those who think they are experts in the financial world.
ESG is bad in the Valley, but still, engineers got to pay bills. Most ignore it as much as possible.
Excellent post.
Decades ago I was in a MBA course on banking.
The professor always warned us—when interest rates rise dump your bank stocks and if you work for a bank get out your resume.
There are real financial experts.
You will never hear from them.
They spend their time getting rich from their knowledge—and their mouths shut.
They live modestly and never talk about money.
The financial “talking heads” are worse than useless—at times they can be contrary indicators.
I’ve been following your posts on various SVB threads, and I think you could give an MBA-level course on many financial subjects right here on FR. :-)
A crisis to be sure for companies that didn't have the inside information the bank officers had so they could pull their money ahead of the failure as the bank officers did when they sold their stock, but I wonder if ol' Garry Tan said the same thing when his favorite politicians and unelected bureaucrats caused a whole bunch of "extinction level events" with their deliberately imposed lockdowns, blaming it, of course, on the Fauci Flu rather than on themselves.
See post 29.
Everyone in the banking industry knows the situation right now.
It is the “innocent civilians” outside the industry who will be left holding the bag.
All startups that followed the “not all eggs in one basket” principle will be alright on this. Suppose they need to have 1M every other week to meet payroll obligations where 200k goes to taxes, 100k goes to insurance/401k, and 700k goes to employees. If you have 3 banks each with an account for payroll checks then there is no risk of delay as you put over 233.34k in each. You also identify the top earners and notify them long before a crisis that their paychecks are most at risk of delays in case of any bank hiccups and that should be less than 20% of the staff. In most cases the reputable ones will have a founder/CEO with several sources of instant liquidity, like home equity lines, Treasury direct account, and other sources available to do infusions to cover a couple of payrolls. If they don’t then they aren’t reputable and deserve to fail.
Not to worry. We taxpayers will bail them out.
Oh. And don’t forget to pay your fair. Only a few more weeks to file.
“If they don’t then they aren’t reputable and deserve to fail.”
Yup—this is like the Wizard of Oz.
The curtain is about to open.....
Honest question - I'm an engineer, not a financial guy - how many payroll processing firms work with multiple bank accounts to pull on?
I can see how, given the massive load of work that goes on in a startup, that such a dumb mistake of "all eggs in one basket" could happen.
Often the CFO guy in a startup is recommended by your VC, and the founders are 99% of time are subject-matter / technical guys. That's why it's really important to not have stupid VC funding you, so they guide you right!
Sick as 💩 woke. ESG, Mother Gaia, LGBTQ+, the entire alphabet soup woke. They focused on woke, not business fundamentals. That’s what happens when you hire faggots and leftist females that can’t look at their own coochie and tell you they are a woman.
The financial “talking heads” are worse than useless—at times they can be contrary indicators.
—
I agree with all your statements.
I took a 5/15 ARM at 2%, knowing that I would refinance after the 5th year when the rate goes adjustable (based on LIBOR). Sure enough, as soon as the mortgage went adjustable, my rate was increased by the maximum 2% to 4%.
This was in March 2020, just before the COVID-19 madness began. I was able to do a loan modification (not a refinance) for the remaining 10 years at 2.625%. I could pay off the remaining balance today, but I'm making more money in interest on my portfolio.
-PJ
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