Episode
E119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
1:29:27
Published: Sat Mar 11 2023
Description
(0:00) Bestie intro! (1:57) Overview of the SVB collapse and bank run (17:53) Who or what is to blame? Debating venture debt (37:11) Contagion risk, second- and third-order effects, government backstops (1:00:36) What does this mean for the VC industry? Silicon Valley panic cycle, advice for founders Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg https://twitter.com/altcap Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://www.fdic.gov/news/press-releases/2023/pr23016.html https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/r/Q1-2023-Investor-Letter.FINAL-030823.pdf https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/Q1-2023-Mid-Quarter-Update-vFINAL3-030823.pdf https://twitter.com/garrytan/status/1634260576431136768 https://seekingalpha.com/article/4565388-svb-financial-blow-up-risk https://www.youtube.com/watch?v=Ymo6Yzjv_KY https://www.bloomberg.com/news/articles/2023-03-10/treasury-closely-watching-siliconvalley-bank-share-plunge https://www.cbsnews.com/news/janet-yellen-ukraine-treasury-secretary-kyiv-visit-volodymyr-zelenskyy https://twitter.com/Rippling/status/1634201986894577665 https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://www.wsj.com/articles/bond-losses-push-silicon-valley-bank-parent-to-raise-capital-125e89d4 https://dfpi.ca.gov/wp-content/uploads/sites/337/2023/03/DFPI-Orders-Silicon-Valley-Bank-03102023.pdf?emrc=bedc09 https://www.google.com/finance/quote/IAT:NYSEARCA
Chapters
Sax announces his new podcast and his new mascot, a bulldog named Moose.
00:00 - 00:35 (00:35)
Summary
Sax announces his new podcast and his new mascot, a bulldog named Moose.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The hosts reflect on the intensity of the financial repercussions of the coronavirus pandemic and compare it to the 2008 financial crisis.
00:35 - 02:44 (02:08)
Summary
The hosts reflect on the intensity of the financial repercussions of the coronavirus pandemic and compare it to the 2008 financial crisis. They also remind listeners to like and subscribe to their podcast.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Silicon Valley Bank, who is used by 50% of venture-backed startups and the majority of venture firms, has suffered a technical outage leaving many companies and investors unable to access their funds in a time of economic struggle.
02:44 - 07:21 (04:37)
Summary
Silicon Valley Bank, who is used by 50% of venture-backed startups and the majority of venture firms, has suffered a technical outage leaving many companies and investors unable to access their funds in a time of economic struggle.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Silicon Valley Bank had $195 billion in liabilities at the end of the year, out of which they owe $173 billion of customer deposits and $22 billion of other debt, leaving them potentially vulnerable to a run on the bank if just 25% of customers demand their cash back.
07:21 - 12:48 (05:27)
Summary
Silicon Valley Bank had $195 billion in liabilities at the end of the year, out of which they owe $173 billion of customer deposits and $22 billion of other debt, leaving them potentially vulnerable to a run on the bank if just 25% of customers demand their cash back.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Venture debt's historical reliance on continued funding from venture capitalists and a distressed venture debt portfolio presents challenges in the face of a recession.
12:48 - 17:31 (04:43)
Summary
Venture debt's historical reliance on continued funding from venture capitalists and a distressed venture debt portfolio presents challenges in the face of a recession.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The effectiveness of venture debt return models over the past decade may not accurately predict future returns, and the current regulatory treatment of 10-year bonds is questionable.
17:32 - 24:55 (07:23)
Summary
The effectiveness of venture debt return models over the past decade may not accurately predict future returns, and the current regulatory treatment of 10-year bonds is questionable. Regulators allowing banks to loan out customer deposits to startups with no credit also poses risks.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Chamath Palihapitiya, Founder and CEO of Social Capital, discusses how VCs stopped giving companies money in the market downturn, but didn't do enough work to help founders cut burn, leading some young capital allocators to try venture debt as a last ditch effort.
24:55 - 28:51 (03:55)
Summary
Chamath Palihapitiya, Founder and CEO of Social Capital, discusses how VCs stopped giving companies money in the market downturn, but didn't do enough work to help founders cut burn, leading some young capital allocators to try venture debt as a last ditch effort.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The majority of Silicon Valley Bank's loan portfolio consists of asset-backed loans, including prepayments on LP commitments.
28:51 - 34:05 (05:14)
Summary
The majority of Silicon Valley Bank's loan portfolio consists of asset-backed loans, including prepayments on LP commitments. The discussion revolves around how the venture debt portfolio will perform in a distressed environment, while the real loss was due to the change in interest rates.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Startups were hit hard by the Archegos scandal and took a massive loss, as they could not deposit more money into the bank but continued to spend at the same rate.
34:05 - 36:43 (02:38)
Summary
Startups were hit hard by the Archegos scandal and took a massive loss, as they could not deposit more money into the bank but continued to spend at the same rate. Janet Yellen, US Treasury Secretary, has stated that the situation is being monitored.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Portfolio companies with millions of dollars in Silicon Valley Bank's money market funds managed by BlackRock or Morgan Stanley are at risk of losing money as SVP lost 30 cents on the dollar.
36:43 - 43:33 (06:50)
Summary
Portfolio companies with millions of dollars in Silicon Valley Bank's money market funds managed by BlackRock or Morgan Stanley are at risk of losing money as SVP lost 30 cents on the dollar. Investors are now offering to buy claims for a fraction of the amount in the hopes of getting some return.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
If Silicon Valley Bank fails to honor its clients' obligations, there is a risk of a bank run that could lead to a wider financial crisis unless the federal government guarantees accounts from the bank being taken over, argues Jim Cramer.
43:33 - 53:30 (09:56)
Summary
If Silicon Valley Bank fails to honor its clients' obligations, there is a risk of a bank run that could lead to a wider financial crisis unless the federal government guarantees accounts from the bank being taken over, argues Jim Cramer.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The controversy around banks investing in illiquid securities arises due to the risks involved, especially when they hold short term deposits.
53:30 - 56:24 (02:54)
Summary
The controversy around banks investing in illiquid securities arises due to the risks involved, especially when they hold short term deposits. While some argue that banks can still make money by underwriting insurance and loans for the right interest rates, allowing them to invest in securities without full liquidity is a subject of debate.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
There is a risk of banks turning deposits into venture capital and investing in high-risk startups which could cause a cascade and lead everyone to put their money in big banks.
56:24 - 1:00:32 (04:07)
Summary
There is a risk of banks turning deposits into venture capital and investing in high-risk startups which could cause a cascade and lead everyone to put their money in big banks.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The uncertainty caused by the COVID-19 crisis is creating a chilling effect in the investment environment, with both general partners and limited partners becoming hesitant to sign term sheets and make capital commitments.
1:00:33 - 1:04:42 (04:08)
Summary
The uncertainty caused by the COVID-19 crisis is creating a chilling effect in the investment environment, with both general partners and limited partners becoming hesitant to sign term sheets and make capital commitments. As a result, less fundings are likely to occur and investors may be forced to focus on only a few winners while making tough decisions about the rest.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
A bank's decision to conduct a capital raise may lead to a run on the bank, resulting in the withdrawal of a significant amount of deposits.
1:04:42 - 1:11:04 (06:21)
Summary
A bank's decision to conduct a capital raise may lead to a run on the bank, resulting in the withdrawal of a significant amount of deposits. The rate at which deposits are taken out can also impact the asset value held at the bank.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
A discussion on the impact of small bank failures on the larger banking industry and the potential consequences for depositors and investors.
1:11:04 - 1:14:45 (03:41)
Summary
A discussion on the impact of small bank failures on the larger banking industry and the potential consequences for depositors and investors.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
In a conversation about potential financial crashes, there is hesitation to warn people about the possibility of a run on the bank because it can create the very situation being warned against.
1:14:46 - 1:19:09 (04:22)
Summary
In a conversation about potential financial crashes, there is hesitation to warn people about the possibility of a run on the bank because it can create the very situation being warned against. Suggestions were made to hand over Silicon Valley bank to a big balance sheet and have a federal agency backstop all banks with $500 billion.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The possible occurrence of business and economic problems unrelated to a banking problem may cause a set of cascading consequences in the market which requires a big slug of capital to support it.
1:19:09 - 1:22:57 (03:48)
Summary
The possible occurrence of business and economic problems unrelated to a banking problem may cause a set of cascading consequences in the market which requires a big slug of capital to support it. The banking sector should have limitations in what they can do with the money to prevent economic collapse.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
The equity tier of regional banks is being liquidated due to a lack of confidence in the regulatory system and concern that this is the first domino to fall if a bank goes into receivership.
1:22:57 - 1:26:42 (03:45)
Summary
The equity tier of regional banks is being liquidated due to a lack of confidence in the regulatory system and concern that this is the first domino to fall if a bank goes into receivership. Depositors are finding it difficult to trust that their money is where it is supposed to be when investments are made in non-markable assets or funds that are not genuine.
EpisodeE119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
PodcastAll-In with Chamath, Jason, Sacks & Friedberg
Jason discusses the categorization of the Capitol rioters and the justification behind the four-year sentence given to an individual with mental illness.
1:26:42 - 1:29:17 (02:34)
Summary
Jason discusses the categorization of the Capitol rioters and the justification behind the four-year sentence given to an individual with mental illness.