Of course the VCs who told their portfolio companies to pull the money were doing the right thing, by the people they are obliged to do the right thing by. They want to protect their companies and their investors. They'd be mad not to, and they are legally obliged in many cases.
I think you'll find a lot of the people complaining are people who got hit and are bitter about it.
e.g. some CFO's seem to be complaining about VCs - the CFOs likely didn't do their job, one part of it is "treasury/cash management". Some VCs are complaining about other VCs - probably they weren't paying attention and their portfolio companies got hammered.
Remember - SVB dusted ~$15 bill on their long term bond bet, it was almost their entire equity base. Pulling your money out was the only sensible action.
No, it actually was incredibly stupid and short-sighted by VCs. Here's Matt Levine on that point [1]:
> Also, I am sorry to be rude, but there is another reason that it is maybe not great to be the Bank of Startups, which is that nobody on Earth is more of a herd animal than Silicon Valley venture capitalists. What you want, as a bank, is a certain amount of diversity among your depositors. If some depositors get spooked and take their money out, and other depositors evaluate your balance sheet and decide things are fine and keep their money in, and lots more depositors keep their money in because they simply don’t pay attention to banking news, then you have a shot at muddling through your problems.
But if all of your depositors are startups with the same handful of venture capitalists on their boards, and all those venture capitalists are competing with each other to Add Value and Be Influencers and Do The Current Thing by calling all their portfolio companies to say “hey, did you hear, everyone’s taking money out of Silicon Valley Bank, you should too,” then all of your depositors will take their money out at the same time. In fact, Bloomberg reported yesterday:
Unease is spreading across the financial world as concerns about the stability of Silicon Valley Bank prompt prominent venture capitalists including Peter Thiel’s Founders Fund to advise startups to withdraw their money. …
Founders Fund asked its portfolio companies to move their money out of SVB, according to a person familiar with the matter who asked not to be identified discussing private information. Coatue Management, Union Square Ventures and Founder Collective also advised startups to pull cash, people with knowledge of the matter said. Canaan, another major VC firm, told firms it invested in to remove funds on an as-needed basis, according to another person.
SVB Financial Group Chief Executive Officer Greg Becker held a conference call on Thursday advising clients of SVB-owned Silicon Valley Bank to “stay calm” amid concern about the bank’s financial position, according to a person familiar with the matter.
Becker held the roughly 10-minute call with investors at about 11:30 a.m. San Francisco time. He asked the bank’s clients, including venture capital investors, to support the bank the way it has supported its customers over the past 40 years, the person said.
Nah, man, you don’t get to be a successful venture capitalist by taking a long view or investing in relationships or being contrarian. I’m sorry, I’m sorry, this is unfair. Of course they were right — Silicon Valley Bank did collapse, and if you got your money out early that was good for you — but that is largely self-fulfilling; if all the VCs hadn’t decided all at once to pull their money, SVB probably would not have collapsed.[6]
Probably is doing a lot of heavy lifting without telling how? Because in the first paragraph, Levine himself says SVB wasn't diversified or large enough to make it through £16b write down on their HTM investments: https://twitter.com/RagingVentures/status/163357916752972595...
This is weak argument. You take your money out of a bank who dusts all their equity on a dumb bet. You don't wait around hoping everyone will wait around.
"Dusts all their equity on a dumb bet"??? They bought mostly agency-backed mortgage based securities! Those are high quality assets. All major banks have the same problem of sitting on hundreds of billions of dollars of unrealized losses in total [1] caused by fallen fixed income security prices. Yet you didn't have other businesses panicking and pulling their deposits.
This is another silly argument. Credit risk is only one of many risks in banking.
They bought a bunch of long dated stuff. The credit quality isn't the problem here, it's the sensitivity to interest rates rising. The value of those long dated bonds fell by $15 billion - almost equal to their total equity capital. It was 40% of their assets. On top of that, they had flighty deposits - not grandma with her $100k in the bank which is FDIC insured, startups with millions in the bank who knew they weren't insured. It was incredibly stupid to be so heavily weighted in long term bonds. As dumb as it gets in banking.
All major banks don't have the same problem. The vast majority of them had/have a portfolio of assets with a weighted average duration significantly shorter than SVB because they understood there was a risk of interest rates rising significantly from the extremely low levels they were at. And most banks have stickier deposits than SVB. So - all banks lost money on their long dated assets, but not the same % of their equity capital (because it's a lower % of their assets) and not with depositors who are likely to pull money fast.
I think you'll find a lot of the people complaining are people who got hit and are bitter about it.
e.g. some CFO's seem to be complaining about VCs - the CFOs likely didn't do their job, one part of it is "treasury/cash management". Some VCs are complaining about other VCs - probably they weren't paying attention and their portfolio companies got hammered.
Remember - SVB dusted ~$15 bill on their long term bond bet, it was almost their entire equity base. Pulling your money out was the only sensible action.