I survived 9-12 March 2023
That was a pretty shitty weekend. I had exposure to a few companies which had recently raised and had substantially all of their money at SVB; with one angel investment I was going to throw in up to 5x my initial investment if needed, and the entrepreneur/founder was pretty awesome about it, which is a good sign. In the bigger impact case I honestly didn’t even know about the exposure to SVB until Thursday PM (I use Mercury for my own company, primarily, and my personal banking is in Puerto Rico and at some credit unions and brokerages) — I was somewhat shitposting about the SVB being doomed, as one does, and this raised the alarm an hour or two earlier than it might have otherwise, in time for wires. LOL.
On the upside, of all weekends to be horrible, this was an hour shorter than any other would have been.
I’m not a lawyer or an accountant or a financial advisor, but I deal with security risk which includes operational risk and having your whole fucking treasury disappear because some idiots at a bank decided to load up on long-dated MBS just to get an extra 1% of yield. The thing where their Chief Risk Officer had left in April 2022 and not been replaced until January 2023, and Mr. Gentile the Bear Stearns guy now working at SVB, were very memeworthy on their own.
My predictions going forward:
Administrative evaluations like “how do you handle your banking” are going to be part of DD worksheet for investments (absolutely will be part for me). Being too prescriptive or proscriptive here is a bad idea, but there are some basic things.
I’d love to work with an accountant/financial ops person to come up with concise best practices for banking; generally stage-dependent, and assuming a normal business which isn’t holding customer funds beyond maybe prepayments on products/services sometimes, it should be fairly straightforward for 0 to $250mm/series B companies. Dual-signature control, treasury management, AP/AR procedures, tax and other compliance, etc. Essentially zero startups hire someone for this even at/after Series A.
Neobanks and fintech win big; great UX, and a good way to automagically split funds across multiple back-end providers earning great yield. Brex right now is one of the easiest for this (combined with expense management, etc.); Mercury is also pretty solid (although with far fewer banking partners.)
Organizations with either lots of cash or real CFOs (or hopefully both!) will end up doing more sophisticated treasury management. One, because damn, earning 0.02% in a non-FDIC insured checking account above $250k, when you could be directly in US Treasuries at 5%…. Two, because even just a weekend of “did we lose access to our funds” is massively demotivating and distracting.
Pretty clear tech has a lot more enemies now than it did on the past. Two great quotes:
Lots of people revealed their character and motivations and this is excellent data for who to do business with going forward and who belongs very near the ramp at the back of the aircraft.
The next 2+ years are going to be even crazier.
Crypto has gotten essentially de-banked in the US. While SVB was the big thing for the whole tech ecosystem, Silvergate and SignatureNY got taken out, mostly in retaliation for being crypto-friendly.
This insanity MIGHT be an opportunity for crypto. If I were Coinbase or another large crypto financial institution, I’d build or buy a neobank/fintech for corporates or HNW sophisticated people, handle deposit management through farming things out to a Redundant Array of Interdependent Banks (thanks, Naval!), and basically win people to crypto by presenting it as a side by side first class alternative to an already-great treasury, AP/AR, etc. system. Being able to send USDC/USDT from within the interface to contractors overseas, ACH to vendors in the US, etc. with a single panel interface would be great for crypto adoption, and it would justify higher fees on a “relationship” basis for someone like Coinbase.
Super happy to be going to Japan this week, even though the US banking system didn’t melt down.