Interesting story, but I've got to complain about the inset text boxes:
> Someone out there is probably mentally screaming at me "you fool!" at this point.
These are each clearly building up to "some explanation" of what the author should have done instead, indicating precisely what his foolish actions were and why. Perhaps we're just supposed to know that, but this is never directly explained in the story and I found it a little upsetting.
Same. I don't really understand what he did wrong, and it seems as though everything worked out okay in the end. As as for "lessons learned," I really don't know if there are any. Just an amusing story of Chase coming to grips with "startup banking" and the founder gaining some local notoriety.
He didn’t do anything legally wrong. He didn’t consider the practical implications of deposit banking. For most of us our balances are low and things just work. Pulling $1M can be problematic if not planned in advance.
Kinda what happened to SVB. They’d likely have been fine if they didn’t tell people they needed money.
I wonder how Alex and Alex's boss would tell this story?
[edited below - because threaded comments can come across wrong]
I wonder if how Alex's boss would tell this story is - my employee landed a $35m account, then failed to manage the account successfully, and when $35m walked out the door, we never understood what we did wrong
Yeah, but that’s a problem with Chase, not a problem with the guy telling this story.
I don’t know about you, but it seemed fairly obvious to me that our protagonist didn’t see the bank as anything other than a convenient stash of money.
Yeah, for sure. If anyone made a real "mistake" here, it was Alex, who failed spectacularly at managing the account.
If our protagonist saw a bank as a convenient stash of money, then that's all it was for him. If it were to be anything else, Alex would have been the person who would inform him of that, something he clearly massively failed to do.
If I happened to start a startup and be given a $35M check, I would do exactly what the person in this story did, for the same reasons, and unless a bank person told me otherwise I wouldn't think anything more of it. A bank is a bank is a bank until they demonstrate otherwise to their customer, not the other way around.
He was just clueless to how banking worked at the time and how bankers expected to be involved with helping new clients gradually grow their banking relationship.
He was a young kid who intuitively engaged in anonymous, electronic, modern banking before bank branches were really there themselves.
To young people who came up after him, his intuitive way became more the norm — especially for VC startups — and the idea that you might buy your banker a bottle of nice whiskey for the holidays makes no sense. But for Alex, the banker, who had a kid come in and grow an account to $35M and then silently drain it without ever consulting with him, the whole experience was alien and absolutely bewildering.
You can think of it as a culture clash or maybe a missed opportunity. More awkward than wrong.
By 2012, the banking industry had spent two or three decades educating customers to teach them that banking is an impersonal transaction which takes place via ATM machines and the internet, and never, ever, ever involves talking to a bank teller behind a counter. They've been trying to de-personalize banking since back when I got my first ATM card in 1983 or so.
Yea, the story isn't how banking online is anonymous and magic, its about how branch banking is extremely regional, and how few of them deal with "pre money" startup financing, and were _structurally_ unprepared to handle it. "I have 35M but need to slowly spend it down until the next funding round" is not what most businesses in LA look like, and the cash infusion presumably allowed the bank to expand lending in the area, and business banking. And when those funds leave, well, there might even have been layoffs.
> They've been trying to de-personalize banking since back when I got my first ATM card in 1983 or so.
For personal banking, absolutely. But the property management business I bought, and then sold, had dedicated account managers at both banks we used, and both they (and the previous owner of my company) had an expectation of personal contact and fairly regular conversations--both because our customers also used those banks, but also just because it's the norm.
The proper procedure for interacting with banks as a startup is knowledge that isn't meant to be disseminated. The entire point this piece is the asides: to make sure the uninitiated know their place by signalling over their heads. The initiated have nothing to learn here, it's just a funny story.
> Perhaps we're just supposed to know that, but this is never
> directly explained in the story and I found it a little upsetting.
This might be an age / generational thing, but all of the issues described in the article are immediately obvious to people who grew up before internet banking.
The default for business accounts in "traditional" banks is that they're handled by a specific named account manager, who is given the credit (or blame) for that account's growth over the years. So walking into some remote branch and opening an account will tie that account directly to the political success of whoever was sitting across the desk from you when you signed the paperwork.
It's a failure mode that doesn't need an explanation to people who are the expected audience of the article. In software terms, imagine an article about launching an MVP that starts off with "so I copy-pasted some PHP from StackOveflow and ran it with default permissions in the same database that stores customer credit card details ...". There doesn't need to be a long digression about why that's bad.
> will tie that account directly to the political success of whoever was sitting across the desk from you when you signed the paperwork.
I don't think the end user of a bank's services can or should be expected to know about, or take this factor into consideration when choosing to close their account or drastically change how they use it, however.
It's not personal, it's business, and to a certain extent any large US domestic bank is functionally equivalent to the other in features, fees and risk level.
If I closed everything I have with Wells Fargo tomorrow and reopened it with BOA or Chase I would expect about the same functionality.
It’s not the historical or national norm to be handed a $1M check, drop it into a bank account like birthday card money, and then conduct all your banking business digitally. Some of that’s a startup thing and some of that’s a generational modern thing.
Traditionally, businesses establish relationships with their banker (a person), who helps steward their accounts, apply for loans, understand and pursue savings and investment options for held balances, etc
Banking organizations are built around this very very long-standing model. There are processes and spreadsheets and powerpoints and dumb little mugs for high performers and all those things.
Clearly, with the consolidation of banks and the pervasiveness of online banking, this is in the process of changing. This story captures one of those transitional moments, where a young kid with a startup is completely blind to what bankers expect to be doing.
But your version of “how things are” is very contemporary, and wasn’t quite the way of things when this story takes place.
According to other comments here[1], he missed on a lot of cool stuff by not engaging with Alex, as usually multimillion dollar account managers have a very personal relationship with the CEO of that company.
But what if you don't want to have business dinners with people after work hours, don't play golf and don't have any kids for the name memorization?
Anecdotally I've worked for a company that bought a lot of lasers. Like, really, a lot. Enough lasers to make the laser vendor fly our sales representative out to our city and hang out visiting us for a few days. They would offer to take the whole team out for dinner and drinks. It was just weird and uncomfortable. I have other things to be doing with my personal evening between 5:30 and 9pm.
A good professional banker, would have helped with essentially every finance related issue the poster may have had. Including getting accounts more organized to help with earning more than the .01% banks usually pay for their checking accounts.
It's like concierge banking, you get 1 person that will just make all of your bank and finance problems go away. You need a house loan, your person would just make it happen. You need financing, they can help with loans, going public, seed rounds whatever you need. They can also help you locate attorneys to help draft financial contracts, etc. Tax specialists that can help you minimize taxes, etc. There isn't much of a limit around both personal and business finance they wouldn't at least help get you pointed in a semi-sane direction with.
Assuming Alex was any good, which clearly they weren't that good, since they did such a terrible job of explaining all they could offer to the blog post writer. That's partly on Chase, but probably mostly on Alex.
We have a banker and I needed to buy a car recently, I told them my plans and they analyzed various payment options(loan, leasing, paying cash) and gave me a recommendation(just pay cash). When it came time to actually buy the car, the dealer wouldn't take a credit card for the entire cost, so my banker organized a cashiers check so I just walked into the closest local branch, picked up the check and was back at the dealer in 5 minutes(not including travel time).
Sure they can do the whole smooozhy mess as well if you really want that, but we don't, so my banker doesn't do any of those things with me. They know the sorts of charities and things I like, so if the bank ends up sponsoring something in my area, they will let me know and organize tickets or whatever if I wanted. I rarely do those sorts of events, but there are certain ones I like and my banker knows that and just organizes tickets and what not for those events once or twice a year that I like doing.
This is so true. Around 2015 I went to buy a house I the Bay Area. I was at a new startup and my income was quite low. I applied for mortgages but got turned down. Rules about income (your paycheck not balances) to payment were quite strict after 2008. To be clear I could write a check for the house. I call my money guy (I had a modest exit a few years before). He said, “I thought we talked about this at the start, but you need anything financially, legally, etc. you call me.” 24 hours later I had a loan from a private bank that did not have to follow the rules because they did not sell the mortgages on. My advisor has a JD and a CFA and is worth every penny as I have neither of those.
I have a new startup now and bank with Chase. I will say the banker asked the right questions, understood this was a startup and went into all they could offer. My biggest gripe with Chase that some above said SVB sorted, is the ability to get a credit card in a company name without being tied to personal, at the size we are.
100%, a good relationship with your banker makes financial issues a non issue. that's literally their job, make your financial issues non-issues.
Obviously good relationships with good bankers only happen if you have sufficient assets that financial problems are not usually a lack of assets problem. :) Every bank will be different in the $$ amounts/assets you need to have to get access to the concierge banker pool. Also every bank has a different name for their private/concierge banking.
Generally speaking $1M or more is sort of the minimum amount to have access to the banks good banker people. When you get into the 20-30M range, you can start thinking about sharing a private office with a few other people also in that range, and when you get into 100M or more you can think about starting your own private office, where you hire a full time money person or three to manage it all for you, and they will deal with the concierge bankers. Private/Family offices are sort of concierge banking plus. The Plus is, they will handle your entire family(however you choose to define it), they will teach you and your family whatever you need to know, they will handle budgets, paying bills all that stuff. They will sort out actually purchasing stuff, organizing trips, generally the sky is the limit here.
At BOA, with $100k worth of assets you can get into Platinum Honors which is good banking, but not at the same level as concierge banking. I.e. you don't get access to private banking, but whenever you walk in or make an appt, the BOA person you get will generally do their best to make you happy. Chase has a similar sort of program I believe, but am unfamiliar with it.
I’ve had plenty of debates about SVB where a key argument is “the bank’s depositors should have known better!”
This kid is now a billionaire(?). I think this is a good example of the financial acumen of a typical SVB customer.
I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work. For better or for worse, a bank is a bank is a bank is how most people see it.
> I think this is a good example of the financial acumen of a typical SVB customer.
While I totally wouldn't expect startup founders to behave hardly any different than Hashimoto, I would expect VCs to have done a much better job helping their startups do cash management. I mean, isn't that a pitch so many VCs give, in that it's not just "we give you money", but we also help connect you with experts for different parts of the business?
Even for pure self interest, if VCs are going to write a "kid" a check for $10 million, wouldn't they want to ensure it was properly safeguarded?
Regardless of the above, I 100% agree with your "we should come up with rules that actually work" statement.
It's possible, just like it's possible to do a detailed food safety inspection on every single thing you bring home from the grocery, but why would anyone want to live in a buyer-beware world where that is expected?
Historically, the FDIC was intended to protect consumer banking. $250k was enough coverage for most consumers, and consumers with more than that (back then) probably had an accountant savvy enough to know better than to keep all the eggs in one basket. The same goes for businesses (including startups). The SVB crash was a wake-up call for businesses that were careless with their finances, and they were lucky to get a (unprecedented) bail-out from an administration with an interest in their success.
>
I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work.
For the most part, they do. The government made it very clear last weekend that deposits are sacred, but the executives and the shareholders will be taken out back and shot if they are caught doing risky things. (Signature bank was seized, and it wasn't even insolvent.)
People are angry because bank executives and shareholders ate all the losses, and the depositors were rescued at no net cost to the taxpayer?
What would make those people happy, exactly, and why should anyone care about their happiness? I rather like living in a world where from the perspective of the end user, my money doesn't disappear because some moron five steps removed from me decided to YOLO the bank on 10-year treasuries.
I also, for similar reasons, like living in a world where I don't need to personally test all my produce for e.coli contamination, or my food coloring for cadmium.
Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.
The government put them out of business for poisoning my food. That's exactly what happened to SVB and Signature. They are gone. Dead. Wiped out. Seized. All the people responsible for mismanaging those banks are now broke. [1][2]
And made me, the depositors, the people impacted by that bad behaviour whole.
Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced?
[1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management.
[2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.
Time will tell. I suspect banks will be more reckless because of this. There’s less incentive to protect deposits if they are all guaranteed, and more incentive to make risky bets.
But it’s also a principled point. If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
> I suspect banks will be more reckless because of this.
Could you outline under what mechanism other banks will look at what happened to Signature and SVB, and conclude that they should engage in behavior that's likely to get them seized, and their equity zeroed out?
> If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
There was no rule that capped recoupable deposits at $250,000. There was simply a rule that guaranteed them up to $250,000.
Also, if your rules result in puppies being regularly pushed into the puppy-shredder, and depositors routinely losing their money through no fault of their own, that's also a bad way to run a society.
You know what's a good way to run a society? Retail banks being a boring, dumb, stable, reliable service.
We actually don’t know if the rules changed. The rules are that the FDIC covers up to 250k in losses for each account. The SVB that the FDIC now controls still has valuable assets which likely cover the accounts as designed. Or at least get close enough that the the difference is marginal.
Consumer protection is part of the FDIC mission; not holding some imaginary, sacred 250k line. The 250k dollar insurance is a means to an end and not a traditional insurance business.
People are angry because (they are being convinced) somebody is getting a hand-out that isn't them and they haven't personally deemed worthy. Just like people get angry over the idea of free healthcare going to immigrants and college loan forgiveness going to.. Whoever.
That's not even what's happening because the FDIC, now in control of SVBs assets, are going to use those assets to balance the books. They have the liquidity to guarantee depositors funds while they wait for the loans and bonds to reach maturity.
> the amount the cashier's check is made out for has to be available at that local branch (or, whichever branch issues it). And, well, local branches I guess don't usually have $1M cash lying around. Or, if they do, its not enough to cover other business activities for the day so they're not willing to part with it.
I get those voicemails from "my personal banker" at a branch of my bank I've never actually walked into a few times a year, "just checking in to see if we're meeting all your needs" or something like that. I hadn't noticed those calls are correlated with me moving around large amounts of money, e.g. when I pool money into a checking account to buy a house or whatnot. I suspected some department is responsible for watching that kind of thing for fraud, but never thought it'd be some random banker at a specific branch.
In general, whenever some business I have a vague professional relationship starts calling me on the phone because clearly some CRM system has prompted them into "just checking in!", it only bothers me and becomes a source of annoyance. I don't like getting calls from people who want to sell me new things or who work on commission.
The likelihood of me continuing as a happy customer is inversely proportional to the number of unsolicited calls I get.
Mostly all this means is these days I give out the main number to my pbx IVR menu and never my direct cellphone number.
I dunno, I kind of like that it’s the same person all the time. If they’re happy with me saying ‘everything is fine’ until everything is not fine and I call them back, that works for me.
I get these exact phone calls from Wells Fargo because they bought my mortgage, I don't have any other accounts with them. Since they bought my mortgage I've never even been in a WF branch. They call from the closest one, which isn't very close.
They are the only bank that's ever called me like this. I have had accounts with many different banks.
I get those calls from my local (Canadian) branch, and I've noticed a correlation with having an unusually large balance. (In fact, I'm expecting such a call in the next few days since I have a new car worth of cash in my account.) It's usually almost immediately apparent that they want to "help" me invest, aka. buy their high fee mutual funds.
Alas, I don't think Tarsnap has ever had such calls from my bank -- I guess it doesn't keep enough cash for them to consider it an exceptional small business account -- but I have had such calls from PayPal... interestingly, not correlated with anything I've noticed, so maybe PayPal is just calling everyone in Tarsnap's volume range on a schedule. Similarly, I get regular "check in" emails from AWS... the most recent one offering a discount ticket to re:invent.
I don't think I've ever had any such calls from Stripe. Now I'm starting to feel unappreciated!
100%. CIBC calls me about that too and tries to upsell. Just tell them you plan to leave the country or something and you're not interested, then they stop chasing.
> I suspected some department is responsible for watching that kind of thing for fraud, but never thought it'd be some random banker at a specific branch.
Why wouldn't the fraud department ask the "account manager" what is going on?
My Dad was in banking in the UK and told stories about inter-bank transfers in London in the 1930s that were effected by two low level employees physically exchanging documents. He said he was always very careful to get a firm grip on the receivable briefcase before releasing his grip on the deliverables.
I'll be honest, all these asides feel like there is some kind of explanation or big reveal that never comes. I can understand a bank identifying a large-sum account and wanting to look after them, being annoyed by that account moving banks as well as a local branch having to take precautions on such large withdrawals. But otherwise, I feel like I'm missing something here that isn't spelled out.
The author is used to thinking of their bank account as an anonymous number, with operations handled impassively by whoever happens to be staffing the bank's reception desk that day. They probably never considered 35 million dollars to be an amount worth fussing over ("this is not a lot of money to a big bank, they'll barely notice").
The bank thinks of multi-million dollar business accounts as a deeply personal relationship between the CEO and account manager, where the AM takes the CEO to fancy dinners and golf outings and remembers the names of the CEO's children. HashiCorp's account might have been the largest that had ever been opened at that particular branch.
This article is an amusing(?) story about those two worldviews making contact.
I admit I was laughing at the part where he transferred out the $35mil and Alex called him.
Honestly I'm sure a lot of people on HN have experienced the "hey I just wanted to see how you were doing" call from their bank. Once you have >$100k in your chase accounts they'll start doing that.
But why would anyone have that much money in their Chase accounts? I keep a nominal amount of money in my chase account and send the bulk of my money to fidelity to throw into whatever investment vehicle I like. Sadly, I think you need to have $1mil at fidelity to get the same red carpet treatment chase will give you for $100k.
> Once you have >$100k in your chase accounts they'll start doing that.
Is there a good reason for this other than if you're about to buy a house or something? Most of my net worth is in investments; very little is in checking or savings, because it doesn't seem like there is any benefit to that.
> Is there a good reason for this other than if you're about to buy a house or something?
Liquidity. FDIC insurance upto $250k. Of course, you don't want to put a big chunk of your money into a bank like this, but $100k is not a "big chunk of your money" to a lot of people, in relative terms.
I'm assuming your sentiment applies to HYSAs as well, which is the better place for this kind of thing.
Nope. And that's part of why they start calling you - to sign you up for CDs, money market accounts, etc. (I'm not sure if they get a commission for selling you into a locked investment, but I imagine they do). They probably also are trying to get you on a good credit card, get a mortgage with them, be the first place you come when you want to buy a car, etc.
I guess I'll note, I've never had that much in my personal account but I have a friend who did for a while (and a family member who also did). Personally, I canceled my chase account because a teller at the local branch was being a condescending dick to me. I assume because I didn't have that much money in my account lmao.
Checking is the backing buffer for a queue of pending transactions. If you have one or two highly-compensated people in your family, and somewhat randomly-distributed large expenses (paying cash for a car, renovating a house, credit card bills after a vacation, etc), then $100k does not seem like an unusually large buffer size.
Hmm yea that doesn't surprise me. I really wasn't sure what the magic number was lol.
Says a lot about the level of service my credit union gives lol. I've had more than that in my account before and they never gave me special treatment. XD
Having that kind of cash with Fidelity gives you a lot of perks, but you still need to keep an eye on them. My Fidelity guy is now a VP, but because of my balances he still handles my accounts personally. I've been with them for a while and my conclusion is that they are no better (and often worse) than I am at financial planning and wealth building. The economy is always changing, and the big sudden changes are the ones that usually catch everyone (including the experts) by surprise. What worked well five years ago doesn't work anymore. You'll never get the kind of attention and analysis from Fidelity (or any firm) that you can get from yourself if you are willing to put in the effort.
> >$100k in your chase accounts they'll start doing that.
Heh, not Wells Fargo.
After 20 years being a customer and carrying very large deposits they will charge you for a cahiers check at the window. After you politely ask for it to be waived (having worked for the bank knowing they can waive it for you), being declined by the manager on duty who handled the escalation, and responding "I need the check but if you charge me for this I will close my account" to the question "Do you still want the check for the fee?"; then they will start calling you after the 10k daily transfers out start.
I am more surprised about the founder lack of interest for bank and finance. It’s fully in his duty to know where his investor money is. And he seems to be careless about it.
It makes sense considering he's gone from founder / CEO -> founder / CTO -> individual contributor i.e. probably never focused on these things and just wanted to build the product as an engineer.
The only thing I was amused about was the fact that a 22 year old without any sort of work experience got 1 Million dollars just like that (and much more later on).
I remember when I bought my first house someone told me to make an appointment to get the cashiers check for the closing day.
I assume it was semi related as you want to be sure they are ready for you / have the money on hand for you to issue the check.
Not that they wouldn’t have the money but depending on some else(s) showing up looking to empty the local branch inadvertently… you want to be sure they got you covered.
One of my landlords was a guy like "Alex", and had a similar fate.
I can't say I shed a single tear for him or Alex. What services did Alex render in this story to justify being a "rising star"? That one account likely earned him significant compensation -- multiples of what I made doing 80 hour weeks in my 20s at 20k/yr -- for a significant chunk of his earning career. For what? A few phone calls to someone who didn't want to be contacted.
The rent seeking component of the American economy needs to be competed out of existence. Their margin is everyone else's broken back.
In other SVB threads commenters are like, if you have this much money it should go into a CD ladder or whatever instead of sitting in a big pile where only $250k of it is actually insured by the FDIC.
Maybe that's one of the things Alex wanted to sell him.
> Big corps (like HashiCorp) make their margins on SWE and FOSS' backs - do you owe them the same ire as landlords?
There is a false equivalency made here, in that it assumes that the debate regarding labor & the debate regarding capital are interchangeable.
Landlords (& possibly account managers like "Alex") derive their compensation from the maintenance & management of the capital's safety & utility: The quality of said capital (whether cash or real estate) should remain constant if they did their job. The debate enters in when the capital owners/managers put in little documented effort & receive large compensations in response.
For Software Corps, their compensations are derived from difference between the value created from the creative, technical, & outreach labor put in from their SWEs, designers, marketers, etc., and the cost of compensating that labor + maintaining the necessary equipment to make the labor usable. For this, the debate enters in on how much they should be compensated for the labor put in.
HashiCorp is one of the most Open Source friendly companies out there. Most of their stack is open sourced, open, and very fairly licensed. I'd say HashiCorp is an exemplar.
For a more traditional small businesses, Alex would be helpful in opening a line of credit, setting up payroll through the bank’s system, suggesting a money market account or CD rotation to park cash, etc — all with a personal familiarity with you and your business, while genuinely invested in helping it financially grow (because that’s good for the bank).
Having a good banker that you trust is very helpful when you’re running a small/local business or bootstrapping.
And yes, just like an B2B SaaS or freemium game that gets lucky and lands a low-maintenance whale, a banker can sometimes earn a lot for doing very little. But that occasional exception doesn’t mean that they’re useless and “need to be competed out of business”
A more traditional small business would have some assets other than whiteboard scribbles and slide decks, and life expectancy of more than a couple of years.
> What services did Alex render in this story to justify being a "rising star"
He didn't.
What is perhaps a touch of poetry is the author learning (the hardway) about the lessons with managing large amounts of cash, while simultaneously learning the hardway about being a customer account manager.
As another commenter wrote, Alex blew his opportunity.
I founded a startup. We raised $2.5M, not all at once. We banked at SVB. It sucked. Subpar online tools. $200/mo “analysis fee,” never once had a “relationship” with anyone. Maybe we were never big enough to be relevant. That’s fair.
My advice: use a retail bank until you have a few million in revenue, then shop around. Make the SVB’s of the world earn your business. SVB in particular was so incredibly entitled.
I’m glad they failed more spectacularly than my little startup.
When you start a startup, especially a venture-funded one, you really only want to be innovative in one area: your core offering. It doesn't make sense to spend an innovation token on your bank. So you go with something tried and true, that's done it a million times before with a million other startups. That was SVB.
Going with something else has potential downsides that you may not even be aware of (as the OP describes).
Seems like this conventional wisdom about innovation tokens was actually very poor in this particular area. Makes me wonder what other bad decisions might be lurking behind that best practice.
Yes, and the FDIC brokers those sales rapidly and with vigor.
If someone doesn’t want to buy a small regional, it’s because the FDIC didn’t care to make it happen. Which isn’t surprising if there is no systemic risk involved.
I didn't know about this until reading things throughout this weekend (which is somewhat telling), but evidently there are a number of approaches that businesses use to avoid having essentially all of their money held as uninsured deposits in a single bank. Those approaches are the seatbelt that we seem to have largely chosen not to wear.
If you think there has been no damage to startups since Thursday... well, you're wrong. This episode just made us all poorer. There will be more regulation, there will be exponentially less goodwill (and our industry was already struggling on this front). Any remnant of an image of "tech" being smart or special somehow is totally shot.
So yeah, spending just a bit more time thinking about how to manage risk would have been a more wise approach.
Sounds more like you are describing Chase bank. It’s tried and true and millions of businesses from small mom and pops to fortune 10 companies use them. They’ve seen it all and could even be an underwriter for your IPO. They can take you from idea to exit.
My startup, which raised $1.2M back in 2015, didn't have to pay any monthly fee -- at least until the balance dropped below some threshold in the 5-digit range at which point they started charging $15/mo, I think.
After that startup failed SVB courted me for a personal account. They actually came to me in person, took me out for coffee and stuff. I didn't even have much money at the time but they just seemed really interested in signing up startup founders (even failed ones).
For comparison I tried talking to Chase Private Client at their Palo Alto branch, since my old 401k had gotten big enough to qualify for their minimum if I rolled it over to them. The banker there practically sneered at me, acted exasperated like I was wasting his time and he had much bigger clients to tend to. Also gave me a spiel about their high-fees wealth management in which he asked leading questions about my investments and then tried to make me feel stupid about my answers so that I'd decide to pay Chase to manage it instead. This was all obviously a marketing shtick and I found it incredibly insulting. I went with SVB.
Yes, SVB's web site was ugly. Weirdly they had totally different ugly web sites for their business and personal arms. It functioned fine, though.
It's not relative to the bank but to the bank branch. I have an account with Chase and I made it clear that I'll be depositing $2K to keep the account on, and I would not be using it for day to day transactions. The branch manager was cool with that and we chatted for an hour or so about different stuff and he actually gave me some real advice.
This is not about Chase, it's about the branch and the branch manager. I'm pretty sure another branch manager will be annoyed talking to a $2k client in deposits with no in/out flows and might not even consider them for an account.
If you want to bank with a specific bank, shop for the branch.
True, a few years later, I now live in Austin and the Chase people here are a whole lot nicer to me. Maybe there's just too many ultra-rich people in Palo Alto, heh.
> The banker there practically sneered at me, acted exasperated like I was wasting his time and he had much bigger clients to tend to
I had a partial version of this experience with Charles Schwab. (I've been a banking customer for many, many years and have been very happy with them). When I left my first startup after the many year run up to the 2008 crisis, I decided to roll my fairly substantial 401(k) balance to my tiny Schwab brokerage account.
Waiting for the rollover check to arrive was nerve-wracking enough, so I decided to deposit it in person at my local branch in a major city rather than mail it to them and wait again. When I walked into the branch, the reception person looked me up and down and was warming up to tell me that no, they don't have public restrooms. Once I gave my account information, they became very friendly and once I plopped the check down on the counter for deposit, it was all coffee, juices, and pastries from then on. ;)
we started at $0 revenue and $2000 initial deposit at citibank. over the next few years we put $millions a year through them, carried a balance of $millions in combined checking and mmf, and sold our company for $millions. now my personal accounts at the bank are in $low-thousands, and my post-sale money is in investment banks.
nobody from citi ever called, or cared, or said anything when i went to the branch other than one time a teller asking me what our business did because he thought we were a tech company and he really liked cloud computing stuff. i was happy to talk to him about it, and that was it.
99% of banking is boring and uneventful, it's just numbers on a screen, especially if you live in an area where big bank accounts are common (certain areas of big states like ca, tx, ny, etc.)
anecdote on an anecodte: when we sold our biz, i tried to transfer ownership of the account to the new owner, and the branch manager couldn't actually make that happen. he said i needed to write a letter (a physical, printed and signed letter) to the headquarters of citi. l-o-l obviously we didn't do that, so we just shut it down and cashier check deposited the balance to the new owner's account at chase - and they happened to have a branch literally 2 blocks away. i just walked in and deposited the check into his account #. the teller seemed like she did this sort of thing on a regular basis.
> 99% of banking is boring and uneventful, it's just numbers on a screen
I wish my bankers would shut up about building a relationship, and just process these numbers. They are the car dealerships of holding money, such employees should be working on instagram not in the real economy. Human in the loop costs huge amounts of money and they only interfere.
Last time after a bank transfer that required log in, login confirmation by phone, bank transfer UI access by digit card security, bank transfer confirmation by SMS…
…she just called to check it was me. For $650.
I wish banks would just shut up and process our money.
$650 is a lot of money. Yes, definitely have those checks. I'd rather they call and check and everything is fine, than they not call, and things not be fine.
650 dollar bills is a lot of singles, it could feed a man for a month or more, or provide enough gas to drive across the US, it must be a lot of money, but it's quickly lost when it comes to basic needs like housing, healthcare and education.
For those saying it's not a lot of money, I shall gladly accept your donations.
$650 would allow me to buy myself a new office chair, or sort out a DIY project. Sure, I can save for these things, but if it's an inconsequential amount for you - it's an amount of consequence for me.
My favorite experience at Citi ironically was closing my checking account. I forgot why but anyway I went to the counter and they just said, 'ok'. I put in my debit card and pin to prove identity, then showed them my license as a second form of identity, then I signed on the electronic pad and received an envelope with my balance in it. Done. No, 'Why are you leaving?' and high pressure tactics - didn't even need to go to one of the desks in the back.
I'll bank again at Citi if I ever need to based solely on how easy it was to leave them.
Not that easy. My experience, I was a client for a long time (>10 years).
One day I was unable to log in. After logging successfully a message popped up demanding debit card activation. Every time I pressed 'cancel' I was logged out. That lasted for months. Effectively they locked me out of online access. By then I moved everything to another bank, so it wasn't a big problem. Then I visited their branch in person and requested all my accounts to be closed. I repeated 'All of them'. They did it, or pretended. I left being sure I'm done with Citi forever. But no, they kept debit card account open, without telling me. For charging purposes, as they don't provide any services, and they know it.
If locking out (they did build and activate this functionality in their system) was the bottom of banking. Silent not closing on request and demanding money for 'service' is a scum. My recommendation: Stay away from Citi.
Brex is way better compared to SVB. SVB had these weird mountains of paperwork when I had to use them for my startup back in 2017. Brex onboarding was instantaneous for my small business.
And I'm curious whatever came out of the fraud investigation at Chase. I mean, there was some fraudster who had control of a well known startup's bank account (granted, the older one) and moving six-figure amounts out of it regularly, what in the world happened?
Four-figure ("thousands of dollars out every few weeks"), presumably specifically to avoid tripping any automated checks on moving over $10k.
But yeah, it's still kind of mind-boggling that they could do this for apparently years without anyone noticing. And not just on Chase's side: how do you not notice that the money customers claim to be paying you is not actually landing in your main bank account?
Typically when buying a house the down payment is either a wire or cashiers check. I did a cashiers check, just drove right from the bank to the title and escrow company.
I wanna know how he managed to initiate a wire for $35MM online (and approximately 100% of account balance), presumably to a brand new recipient, and only got a single phone call and the wire request wasn't rejected. Maybe things have changed, but my experience now is that I'd have to go into a branch to do that wire, and I'd probably get the normal verification call plus another from the account manager.
I opened a new account and ACHed $25k into it which triggered all sorts of "fraud alerts" and put my money in limbo for days. Ended up having to get on a three way conference call for the transfer to go through.
I don’t know why the author cringes so much or feels like they made mistakes. You don’t owe Chase anything, it’s on them to earn your business and treat you like the major account you are. We had a similar situation and Chase treated us poorly, ultimately denying my wife and I a relatively small home mortgage, despite having millions in a business account with them. I will never forget how they made us feel. All I see in this story is more cluelessness from Chase, not any mistakes by the author.
They’ve been chasing our business ever since we moved to SVB post Series A. They’re going to get it since we wired our money out of SVB today (not my decision), but do they deserve it? Absolutely not.
You don't plop 35MM into a single bank account and sit on it. The cringe isn't about feeling bad for Chase. It's about watching a 22 year old learn how to manage incredible amounts of cash.
I'm happy to believe you on that point, but can you explain WHY? It appears to me that accounting is the exact type of generalized skill with well-established standards that makes sense to outsource.
Thats the point, good accounting ISNT a generalized skill at all.
Once you get past "how much is in the checking account" and into the why attached to quantity then you get insight. What is the cost and value of a client? Are there fixed costs (acquisition, setup) and variable (AWS/Usage).
The ebb and flow of money and someone keeping an eye on it matter. Where and how you bank matters (lesson some are just learning). Hell just pricing a product internationally is a task that genuinely requires an accountant.
Go hang with accountants, learn what they do and see the insight they provide.
Accountants should be the ones running the companies. Mine is run by them, and it's great. There are some incredible perks, like always knowing the company is financially in a very good place and taking appropriate risks, a culture of transparency and collaboration ... I could go on.
First time I've heard a positive review about a company being run by the bean counters, who are generally more known for being brought in and cutting tiny luxuries which don't generate money or make financial sense, like free sodas in the break room.
“Being brought in” could be the crucial difference, yeah? When a company starts with beans on staff from the start, maybe there’s more of a sense of security
They're accountants, but I wouldn't call them "bean counters". They have a vision for the office of the CFO, and it's that the accounting team rises above mere bean counting into financial leadership.
The company was also a VC-backed startup and is on the road to IPO, so it's run like an investment, not a cost center -- and hiring and keeping great employees is a priority. The perks and benefits are really great. It has won awards for the last ~5 years for being the "best company to work for in $region".
You might be confusing accounting with financial management. Accounting is outsourced by nearly 100% of startups.
Financial management for startups with respect to "how big you are" is almost always "not big enough" until you have tens of millions. Both seed and series a are usually to be spent within a couple of years and hiring a full time financial manager to represent 5%-10% of payroll is just not worth it, he won't recoup his salary even by excellent trickery.
In the post covid world, I find many young engineers fall into the trap of squeezing more yield out of their meagre savings early in their career through financial engineering rather than focusing on their personal development and growing in their actual professional lives.
All the amateur investors who made big returns in the 2020-22 period and thought they figured it out will now have a hard time making sense of the markets in the new regime of high interest rates.
>All the amateur investors who made big returns in the 2020-22 period and thought they figured it out
Chasing big returns generally leads to massive losses so I cant fault people for sitting in cash but I dont recommend taking inflation lightly. The least one should do is beat that hurdle rate and conserve value.
But it’s not bad to diversify risk early on and have a plan for that. High yield savings accounts and treasury notes are standard practice. We’re not talking about founders taking moonshots in the market. We’re talking about $35MM in a bank account that doesn't even match inflation.
To put that into perspective. That's $1MM a year (at %3 inflation) going into the toilet just because you don't want to do some minimal cash management. You could hire a CFO for that price and it would pay for itself 3 times over. I mean I get the vibe and totally agree that you don't want to overthink things. But I also think it's easy to underestimate the value you're leaving on the table and the risk you're exposing yourself to by not giving it any thought.
Definitely! They forgot that there are two type of revenues for a company, and that it can be applied for personal finance as well :
Operational revenues : the real job, the thing that is making money. The yield on the operational one is
Financial revenues : cash sitting around non-invested yet into operations, waiting for the next project to invest in.
The yield on the operational revenues is much higher and the investment in it could be transposed as for example : spending for some certifications, go to online or physical classes, etc
With the resulting 15,714% return over 11 years, the guy could be forgiven for getting 0% on cash on the $35m at the time. Theres a real opportunity cost if you were to spend your time optimizing your return on $35m of cash via financial instruments instead of running your startup.
> Being focused on his startup instead of maximizing the yield of these $35M allowed him to turn it into a $5.5Bn company.
In this case. I'd bet there are more than a few startups who would have survived if they'd spent a few hours on the phone with their bank to help manage funding cash more efficiently.
The cringe isn't that he failed to maximize yield, it's that he failed to protect that $35m from tail risks, by parking the lion's share of it in T-bills.
"Maximizing yield" would mean earning a few % annually in interest. "Minimizing insolvency risk" means paying a few % to ensure it doesn't go to (effectively) zero in an SVB-like situation, and requires literally a day or two of work.
However, it's difficult to fault Mitchell for knowing these things. It sounds like the VP of Finance was brought in at the right time (Series B), and did the right things.
With what Mitchell knows now, and especially given the industry's recent experience at SVB, I'd guess that he would advise any young founders he works with to cover this base at their own companies even earlier than he did.
What more was Chase expected to do here? What would treating Hashicorp as a major account have entailed? A phone call to find out what else was needed?
In our experience there was so much they could have done. I just compare it to our experience with SVB which got us no-personal guarantee credit cards, availability of venture debt, access to mortgages (something I would have done if a local credit union hadn’t stepped up). Chase never did any of those things with us. They need to step it way up if they want to win startup business long term and not just in the wake of a crisis.
If you have enough assets, Chase will absolutely lend against that collateral.
“Enough” is likely the key word. But if you have business or personal accounts with over a couple million (and certainly $10+ million), I would be shocked if someone higher up than a clerk hadn’t personally reached out to you, tried to take you out to coffee, and let you know the perks applicable to your personal situation they can provide you that you can’t find on a website.
Sure, they likely weren’t as enticing as SVB’s perks nor as willing to lend to an account that had $0 yesterday and millions the next, but they absolutely will offer personal loans/mortgages against stock compensation on the guarantee you keep your account with them above a certain threshold, etc.
Similar to the reason mortgage APR will differ among seemingly similar homebuyers at the same point in time (and even then, only after you actually send over your financial documentation can you see your rate), my guess would be one can't exist because everything is based upon not just the financial situation of the bankee but also (as we've seen with SVB) the banker.
Many of the West Coast "Chase" branches and operations are just rebranded WaMu ones from when they collapsed during the GFC. Probably the new JPM Chase won't lose your money but the predecessor came pretty close.
Yup, you can check the routing numbers to find this out. I haven’t dealt with east coast Chase but I’d be willing to bet it’s a completely different experience.
I would expect them to say hey, now that you've got so much more capital in your account I'd like to set up a short meeting to learn more about your company. Then they meet with you, learn a bit about your business trajectory (for their own planning) and pitch some significantly increased benefits to keep you around.
You don't have to accept, but they should at least actively try to bring you in if your account is a bug or important one.
There are plenty of ways to get you in the conversational door like offering a better rate or to help protect the account.
Eventually someone from hashicorp "...notices we have ~$35M sitting in cash in a Chase bank account. This is obviously not a smart thing to do, so he suggests some financial plans for how to better safeguard and utilize this mountain of cash". The bank could have been the party to preemptively explain this to the author, and if they did they might have been able to be a part of the solution (or at least try to negotiate for it) instead of losing the entire account.
It sounds like the bank manager was being too delicate, asking the author if they had any banking needs when he didn't really think he had any. They should have been more blunt and said look dude you have a ton of money in here, you're probably not used to managing this amount of money, we need to take just a bit of time to discuss it and we'll make it easy and worth your while.
Agreed with this. The story written from Alex's perspective would probably be: "how I blew a once in a lifetime shot to be the best business banker in America but I took the opportunity for granted."
How could have Chase earned their business better when the person on the account says everything is fine and gets off the phone as fast as possible? I'm pretty sure more phone calls would have soured things. If the author was saying that chase then turned them down for a loan or something, sure that would be comparable.
Give better information by email, something that doesn't interrupt me and make me deal with it right now?
Other than that, it's not clear from this story why they chose Silicon Valley Bank - it sounds like this VP of Finance is the person who could explain what (if anything) they did better than Chase.
Spammy emails are somewhat annoying, but they're 10x better than spammy phone calls. Any company that wants me to do things over the phone will drop right to the bottom of my list, especially if they want to do it by them calling me rather than me calling them.
Maybe offer assistance or discounts or anything else?
The usual emails of credit cards, better interest on savings (money sat in the account for nothing) or others if it didn't happen?
At least from the recount there was no mention of e.g. we realised you're a big customer and we have some special packages for you. Services like AWS would immediate assign an account manager, want to know you more and offer training, assistance and all sorts of things and not just when you make a transfer.
Instead of asking if everything was okay, and could they do something for them, Alex should have said something like:
"Hi, are you actually a startup? Because with a regular business account you're missing out on a lot of money. I would very much like to schedule a few minutes with your CFO and talk over what could be done."
Maybe he bites maybe he doesn't, but he's no longer so naïve.
Yeah, it seems super weird this Alex guy didn't just send them some kind of brochure or information of "These are all the services Chase offers to businesses, give us a call".
Also, the implication that the Alex guy was fired or something because a customer decided to switch banks seems to only indicate that Chase has a toxic internal culture. Customers switching banks is not unheard of...
The last week has made me really question why VC firms don't provide cash management crash courses to founders, or something of the like (cash management consultants or something). It seems like a huge flight risk to write $10MM and $20MM checks and just hand them to a founder with no financial staff whatsoever who only cares about finding PMF and who couldn't care less about cash management. It's great that Mercury is doing all this stuff for founders, just seems like it should be table stakes for VCs to require some sort of cash plan to be approved before handing over the check. But what do I know maybe 10MM is peanuts.
VCs are psychopaths. They don't care if the world burns down as long as 1 out of 50 investments turns into a huge valuation. Poor cash management? They wouldn't care if he was feeding stray cats to an ML algorithm and burning $1000 bills to power a crypto miner.
What a crazy story, love it. I'm a HashiCorp shareholder and was quite concerned about their SVB exposure as I was pretty sure they banked with them. Thankfully it worked out, at least thus far.
I don't think that's relevant to the post though. It's essentially saying that a big bank has bankers that want to check on accounts once they get large enough and he didn't understand that
The author must have never seen a rerun of Beverly Hill Billies growing up. The bank President was constantly courting the attention of Jed Clampett and his family!
With so much dramatic build up I was fully expecting him to lose a bunch of money, but what followed was... nothing. Like, nothing happened. "My final check was delayed by a few days and I got weird looks from bank employees", that's it.
I wonder if this would have gone differently if the author had originally opened business account with the local teacher's credit union. That could have really been interesting to see how the account manager handled his account. And @jmillikin's comment about the author being used to treating banking as an anonymous store for cash and executor of transactions vs how they have traditionally worked is spot on.
The oddest thing to me is being given round after round of cash, and not needing it. Sure it could be 'invested' in an index or something. But wasn't it meant to be 'invested' in the actual startup?
I have no idea why Hashicorp didn't use it. The point is just that if you made a contract for something and they hold up their end, you've gotta hold up your end, even if you ended up not using what they provided.
I'm sure there are cases where doing a specific thing (e.g. buying another company, or paying off particular debts) with the money is part of the deal. And sometimes an investor will demand a board seat which gives them a way to influence other decisions. But I'd be amazed if a VC wanted a "spend the money on something" provision - if you really can't think of anything to use the money for, letting it sit is better than burning it. You're always obliged to use your best business judgement on behalf of your shareholders, which would seem to cover making use of the money if you have a good use for it, and not if you don't.
How does that even happen? Don't they have salaries to pay or marketing campaigns to run, pay rent? How can he sit on a pile of money and still grow the business?
TBH, I don't really think that the author of this post screwed up. There's a lot of self-flagellation, but, ultimately, Chase offered accounts. The company used the services written on the tin. It's far from obvious that one needs to show up in person to close bank accounts. (I've certainly closed bank accounts without showing up in person, or, hah, at least I think I have.) It's far from obvious that a bank wouldn't be able to handle large amounts of money without confusedly celebrating and then condemning the poor fool who types the information into the computer. And ultimately, it all got fixed, and the only serious hitch to fixing it was the fact that for some weird-ass reason the bank had some rule that it couldn't issue a cashiers check unless there was a wad of cash that size in a particular branch, which is completely nutso given that 99.999999% of bank money is just bits anyway.
Yeah the "poor fool who types the information into the computer", or "Alex" in this case, is really the most enlightening thing in the story for me. It's amazing that this person who has exactly zero impact on account sizes... is rewarded for and takes credit for account sizes.
I think all the replies here about people describing all their personal interactions with their banker is hiliarious. I'm in my 40s, started "banking" well before internet banking was a thing, and I still had no idea why the author was cringing at his naivety. Until the people here with actual money spelled it out for me. My banker never knew me from Adam, and my typical withdrawal was to buy ramen... Oh how the rest of you live!
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[ 3.8 ms ] story [ 209 ms ] thread> Someone out there is probably mentally screaming at me "you fool!" at this point.
These are each clearly building up to "some explanation" of what the author should have done instead, indicating precisely what his foolish actions were and why. Perhaps we're just supposed to know that, but this is never directly explained in the story and I found it a little upsetting.
Kinda what happened to SVB. They’d likely have been fine if they didn’t tell people they needed money.
[edited below - because threaded comments can come across wrong]
I wonder if how Alex's boss would tell this story is - my employee landed a $35m account, then failed to manage the account successfully, and when $35m walked out the door, we never understood what we did wrong
I don’t know about you, but it seemed fairly obvious to me that our protagonist didn’t see the bank as anything other than a convenient stash of money.
If our protagonist saw a bank as a convenient stash of money, then that's all it was for him. If it were to be anything else, Alex would have been the person who would inform him of that, something he clearly massively failed to do.
If I happened to start a startup and be given a $35M check, I would do exactly what the person in this story did, for the same reasons, and unless a bank person told me otherwise I wouldn't think anything more of it. A bank is a bank is a bank until they demonstrate otherwise to their customer, not the other way around.
He was just clueless to how banking worked at the time and how bankers expected to be involved with helping new clients gradually grow their banking relationship.
He was a young kid who intuitively engaged in anonymous, electronic, modern banking before bank branches were really there themselves.
To young people who came up after him, his intuitive way became more the norm — especially for VC startups — and the idea that you might buy your banker a bottle of nice whiskey for the holidays makes no sense. But for Alex, the banker, who had a kid come in and grow an account to $35M and then silently drain it without ever consulting with him, the whole experience was alien and absolutely bewildering.
You can think of it as a culture clash or maybe a missed opportunity. More awkward than wrong.
For personal banking, absolutely. But the property management business I bought, and then sold, had dedicated account managers at both banks we used, and both they (and the previous owner of my company) had an expectation of personal contact and fairly regular conversations--both because our customers also used those banks, but also just because it's the norm.
This was in 2020, for reference.
Business banking isn't all startups.
Move along, citizen.
The default for business accounts in "traditional" banks is that they're handled by a specific named account manager, who is given the credit (or blame) for that account's growth over the years. So walking into some remote branch and opening an account will tie that account directly to the political success of whoever was sitting across the desk from you when you signed the paperwork.
It's a failure mode that doesn't need an explanation to people who are the expected audience of the article. In software terms, imagine an article about launching an MVP that starts off with "so I copy-pasted some PHP from StackOveflow and ran it with default permissions in the same database that stores customer credit card details ...". There doesn't need to be a long digression about why that's bad.
I don't think the end user of a bank's services can or should be expected to know about, or take this factor into consideration when choosing to close their account or drastically change how they use it, however.
It's not personal, it's business, and to a certain extent any large US domestic bank is functionally equivalent to the other in features, fees and risk level.
If I closed everything I have with Wells Fargo tomorrow and reopened it with BOA or Chase I would expect about the same functionality.
Traditionally, businesses establish relationships with their banker (a person), who helps steward their accounts, apply for loans, understand and pursue savings and investment options for held balances, etc
Banking organizations are built around this very very long-standing model. There are processes and spreadsheets and powerpoints and dumb little mugs for high performers and all those things.
Clearly, with the consolidation of banks and the pervasiveness of online banking, this is in the process of changing. This story captures one of those transitional moments, where a young kid with a startup is completely blind to what bankers expect to be doing.
But your version of “how things are” is very contemporary, and wasn’t quite the way of things when this story takes place.
1. https://news.ycombinator.com/item?id=35161313
Anecdotally I've worked for a company that bought a lot of lasers. Like, really, a lot. Enough lasers to make the laser vendor fly our sales representative out to our city and hang out visiting us for a few days. They would offer to take the whole team out for dinner and drinks. It was just weird and uncomfortable. I have other things to be doing with my personal evening between 5:30 and 9pm.
It's like concierge banking, you get 1 person that will just make all of your bank and finance problems go away. You need a house loan, your person would just make it happen. You need financing, they can help with loans, going public, seed rounds whatever you need. They can also help you locate attorneys to help draft financial contracts, etc. Tax specialists that can help you minimize taxes, etc. There isn't much of a limit around both personal and business finance they wouldn't at least help get you pointed in a semi-sane direction with.
Assuming Alex was any good, which clearly they weren't that good, since they did such a terrible job of explaining all they could offer to the blog post writer. That's partly on Chase, but probably mostly on Alex.
We have a banker and I needed to buy a car recently, I told them my plans and they analyzed various payment options(loan, leasing, paying cash) and gave me a recommendation(just pay cash). When it came time to actually buy the car, the dealer wouldn't take a credit card for the entire cost, so my banker organized a cashiers check so I just walked into the closest local branch, picked up the check and was back at the dealer in 5 minutes(not including travel time).
Sure they can do the whole smooozhy mess as well if you really want that, but we don't, so my banker doesn't do any of those things with me. They know the sorts of charities and things I like, so if the bank ends up sponsoring something in my area, they will let me know and organize tickets or whatever if I wanted. I rarely do those sorts of events, but there are certain ones I like and my banker knows that and just organizes tickets and what not for those events once or twice a year that I like doing.
I have a new startup now and bank with Chase. I will say the banker asked the right questions, understood this was a startup and went into all they could offer. My biggest gripe with Chase that some above said SVB sorted, is the ability to get a credit card in a company name without being tied to personal, at the size we are.
Obviously good relationships with good bankers only happen if you have sufficient assets that financial problems are not usually a lack of assets problem. :) Every bank will be different in the $$ amounts/assets you need to have to get access to the concierge banker pool. Also every bank has a different name for their private/concierge banking.
Generally speaking $1M or more is sort of the minimum amount to have access to the banks good banker people. When you get into the 20-30M range, you can start thinking about sharing a private office with a few other people also in that range, and when you get into 100M or more you can think about starting your own private office, where you hire a full time money person or three to manage it all for you, and they will deal with the concierge bankers. Private/Family offices are sort of concierge banking plus. The Plus is, they will handle your entire family(however you choose to define it), they will teach you and your family whatever you need to know, they will handle budgets, paying bills all that stuff. They will sort out actually purchasing stuff, organizing trips, generally the sky is the limit here.
At BOA, with $100k worth of assets you can get into Platinum Honors which is good banking, but not at the same level as concierge banking. I.e. you don't get access to private banking, but whenever you walk in or make an appt, the BOA person you get will generally do their best to make you happy. Chase has a similar sort of program I believe, but am unfamiliar with it.
This kid is now a billionaire(?). I think this is a good example of the financial acumen of a typical SVB customer.
I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work. For better or for worse, a bank is a bank is a bank is how most people see it.
> Hashimoto, the original CEO, is a new billionaire, worth $1.2 billion based on the IPO price.
https://www.forbes.com/sites/kenrickcai/2021/12/09/hashicorp...
While I totally wouldn't expect startup founders to behave hardly any different than Hashimoto, I would expect VCs to have done a much better job helping their startups do cash management. I mean, isn't that a pitch so many VCs give, in that it's not just "we give you money", but we also help connect you with experts for different parts of the business?
Even for pure self interest, if VCs are going to write a "kid" a check for $10 million, wouldn't they want to ensure it was properly safeguarded?
Regardless of the above, I 100% agree with your "we should come up with rules that actually work" statement.
I strongly suspect that SVB's relations with the VCs interfered with this obvious item.
But I think it’s beyond the ability of many.
For the most part, they do. The government made it very clear last weekend that deposits are sacred, but the executives and the shareholders will be taken out back and shot if they are caught doing risky things. (Signature bank was seized, and it wasn't even insolvent.)
What would make those people happy, exactly, and why should anyone care about their happiness? I rather like living in a world where from the perspective of the end user, my money doesn't disappear because some moron five steps removed from me decided to YOLO the bank on 10-year treasuries.
I also, for similar reasons, like living in a world where I don't need to personally test all my produce for e.coli contamination, or my food coloring for cadmium.
Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.
And made me, the depositors, the people impacted by that bad behaviour whole.
Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced?
[1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management.
[2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.
But it’s also a principled point. If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
Could you outline under what mechanism other banks will look at what happened to Signature and SVB, and conclude that they should engage in behavior that's likely to get them seized, and their equity zeroed out?
> If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
There was no rule that capped recoupable deposits at $250,000. There was simply a rule that guaranteed them up to $250,000.
Also, if your rules result in puppies being regularly pushed into the puppy-shredder, and depositors routinely losing their money through no fault of their own, that's also a bad way to run a society.
You know what's a good way to run a society? Retail banks being a boring, dumb, stable, reliable service.
What rules were broken? Tell us, what are the rules the FDIC operate under?
People are angry because (they are being convinced) somebody is getting a hand-out that isn't them and they haven't personally deemed worthy. Just like people get angry over the idea of free healthcare going to immigrants and college loan forgiveness going to.. Whoever.
That's not even what's happening because the FDIC, now in control of SVBs assets, are going to use those assets to balance the books. They have the liquidity to guarantee depositors funds while they wait for the loans and bonds to reach maturity.
I guess a flight to New York is worth it.
The likelihood of me continuing as a happy customer is inversely proportional to the number of unsolicited calls I get.
Mostly all this means is these days I give out the main number to my pbx IVR menu and never my direct cellphone number.
I get these exact phone calls from Wells Fargo because they bought my mortgage, I don't have any other accounts with them. Since they bought my mortgage I've never even been in a WF branch. They call from the closest one, which isn't very close.
They are the only bank that's ever called me like this. I have had accounts with many different banks.
Alas, I don't think Tarsnap has ever had such calls from my bank -- I guess it doesn't keep enough cash for them to consider it an exceptional small business account -- but I have had such calls from PayPal... interestingly, not correlated with anything I've noticed, so maybe PayPal is just calling everyone in Tarsnap's volume range on a schedule. Similarly, I get regular "check in" emails from AWS... the most recent one offering a discount ticket to re:invent.
I don't think I've ever had any such calls from Stripe. Now I'm starting to feel unappreciated!
Why wouldn't the fraud department ask the "account manager" what is going on?
Like a lot of people in startups.
Some of which fail. Some due to svb. Some to other reasons.
Same “newbie taking serious action” trend.
Like 17/18 yo kids getting signed up with predatory college loans.
We’ll bail out capital owning class members… but those same folk laugh at the student loan cohort…
The bank thinks of multi-million dollar business accounts as a deeply personal relationship between the CEO and account manager, where the AM takes the CEO to fancy dinners and golf outings and remembers the names of the CEO's children. HashiCorp's account might have been the largest that had ever been opened at that particular branch.
This article is an amusing(?) story about those two worldviews making contact.
Doesn't seem like that a big of deal, but a bummer for sure!
Honestly I'm sure a lot of people on HN have experienced the "hey I just wanted to see how you were doing" call from their bank. Once you have >$100k in your chase accounts they'll start doing that.
But why would anyone have that much money in their Chase accounts? I keep a nominal amount of money in my chase account and send the bulk of my money to fidelity to throw into whatever investment vehicle I like. Sadly, I think you need to have $1mil at fidelity to get the same red carpet treatment chase will give you for $100k.
They said in TFA they were just chugging along with the startup and didn’t know any better until hiring a finance person.
Obviously having $35m sitting in a bank account is less than optimal.
Is there a good reason for this other than if you're about to buy a house or something? Most of my net worth is in investments; very little is in checking or savings, because it doesn't seem like there is any benefit to that.
Liquidity. FDIC insurance upto $250k. Of course, you don't want to put a big chunk of your money into a bank like this, but $100k is not a "big chunk of your money" to a lot of people, in relative terms.
I'm assuming your sentiment applies to HYSAs as well, which is the better place for this kind of thing.
I guess I'll note, I've never had that much in my personal account but I have a friend who did for a while (and a family member who also did). Personally, I canceled my chase account because a teller at the local branch was being a condescending dick to me. I assume because I didn't have that much money in my account lmao.
Says a lot about the level of service my credit union gives lol. I've had more than that in my account before and they never gave me special treatment. XD
Heh, not Wells Fargo.
After 20 years being a customer and carrying very large deposits they will charge you for a cahiers check at the window. After you politely ask for it to be waived (having worked for the bank knowing they can waive it for you), being declined by the manager on duty who handled the escalation, and responding "I need the check but if you charge me for this I will close my account" to the question "Do you still want the check for the fee?"; then they will start calling you after the 10k daily transfers out start.
I am more surprised about the founder lack of interest for bank and finance. It’s fully in his duty to know where his investor money is. And he seems to be careless about it.
I assume it was semi related as you want to be sure they are ready for you / have the money on hand for you to issue the check.
Not that they wouldn’t have the money but depending on some else(s) showing up looking to empty the local branch inadvertently… you want to be sure they got you covered.
I can't say I shed a single tear for him or Alex. What services did Alex render in this story to justify being a "rising star"? That one account likely earned him significant compensation -- multiples of what I made doing 80 hour weeks in my 20s at 20k/yr -- for a significant chunk of his earning career. For what? A few phone calls to someone who didn't want to be contacted.
The rent seeking component of the American economy needs to be competed out of existence. Their margin is everyone else's broken back.
Maybe that's one of the things Alex wanted to sell him.
There is a false equivalency made here, in that it assumes that the debate regarding labor & the debate regarding capital are interchangeable.
Landlords (& possibly account managers like "Alex") derive their compensation from the maintenance & management of the capital's safety & utility: The quality of said capital (whether cash or real estate) should remain constant if they did their job. The debate enters in when the capital owners/managers put in little documented effort & receive large compensations in response.
For Software Corps, their compensations are derived from difference between the value created from the creative, technical, & outreach labor put in from their SWEs, designers, marketers, etc., and the cost of compensating that labor + maintaining the necessary equipment to make the labor usable. For this, the debate enters in on how much they should be compensated for the labor put in.
The two debates are not strictly equal.
You’ve managed to be simultaneously very right and so wrong
I don't have much respect for people who make their living off of capital rather than labor.
Having a good banker that you trust is very helpful when you’re running a small/local business or bootstrapping.
And yes, just like an B2B SaaS or freemium game that gets lucky and lands a low-maintenance whale, a banker can sometimes earn a lot for doing very little. But that occasional exception doesn’t mean that they’re useless and “need to be competed out of business”
He didn't.
What is perhaps a touch of poetry is the author learning (the hardway) about the lessons with managing large amounts of cash, while simultaneously learning the hardway about being a customer account manager.
As another commenter wrote, Alex blew his opportunity.
It was all outside of his actions and any benefit he received was purely accidental.
My advice: use a retail bank until you have a few million in revenue, then shop around. Make the SVB’s of the world earn your business. SVB in particular was so incredibly entitled.
I’m glad they failed more spectacularly than my little startup.
Going with something else has potential downsides that you may not even be aware of (as the OP describes).
Uninsured Indymac depositors got $0.50/dollar and usually, an uninsured depositor at a small bank can expect $0.60-0.75/dollar.
If someone doesn’t want to buy a small regional, it’s because the FDIC didn’t care to make it happen. Which isn’t surprising if there is no systemic risk involved.
Other than a weekend of stress, what was the actual downside to a founder of using SVB?
Is driving without a seatbelt not a poor decision if one walks away from the wreck?
The normal retail banks are TERRIBLE. I did my startup using a retail bank to start (BofA), and it was an absolute nightmare.
I ended up at First Republic, and they’ve been great.
It’s also something that I have only learned this weekend although I was never in a position to need one
Clearly yes.
If you think there has been no damage to startups since Thursday... well, you're wrong. This episode just made us all poorer. There will be more regulation, there will be exponentially less goodwill (and our industry was already struggling on this front). Any remnant of an image of "tech" being smart or special somehow is totally shot.
So yeah, spending just a bit more time thinking about how to manage risk would have been a more wise approach.
My startup, which raised $1.2M back in 2015, didn't have to pay any monthly fee -- at least until the balance dropped below some threshold in the 5-digit range at which point they started charging $15/mo, I think.
After that startup failed SVB courted me for a personal account. They actually came to me in person, took me out for coffee and stuff. I didn't even have much money at the time but they just seemed really interested in signing up startup founders (even failed ones).
For comparison I tried talking to Chase Private Client at their Palo Alto branch, since my old 401k had gotten big enough to qualify for their minimum if I rolled it over to them. The banker there practically sneered at me, acted exasperated like I was wasting his time and he had much bigger clients to tend to. Also gave me a spiel about their high-fees wealth management in which he asked leading questions about my investments and then tried to make me feel stupid about my answers so that I'd decide to pay Chase to manage it instead. This was all obviously a marketing shtick and I found it incredibly insulting. I went with SVB.
Yes, SVB's web site was ugly. Weirdly they had totally different ugly web sites for their business and personal arms. It functioned fine, though.
This is not about Chase, it's about the branch and the branch manager. I'm pretty sure another branch manager will be annoyed talking to a $2k client in deposits with no in/out flows and might not even consider them for an account.
If you want to bank with a specific bank, shop for the branch.
I had a partial version of this experience with Charles Schwab. (I've been a banking customer for many, many years and have been very happy with them). When I left my first startup after the many year run up to the 2008 crisis, I decided to roll my fairly substantial 401(k) balance to my tiny Schwab brokerage account.
Waiting for the rollover check to arrive was nerve-wracking enough, so I decided to deposit it in person at my local branch in a major city rather than mail it to them and wait again. When I walked into the branch, the reception person looked me up and down and was warming up to tell me that no, they don't have public restrooms. Once I gave my account information, they became very friendly and once I plopped the check down on the counter for deposit, it was all coffee, juices, and pastries from then on. ;)
we started at $0 revenue and $2000 initial deposit at citibank. over the next few years we put $millions a year through them, carried a balance of $millions in combined checking and mmf, and sold our company for $millions. now my personal accounts at the bank are in $low-thousands, and my post-sale money is in investment banks.
nobody from citi ever called, or cared, or said anything when i went to the branch other than one time a teller asking me what our business did because he thought we were a tech company and he really liked cloud computing stuff. i was happy to talk to him about it, and that was it.
99% of banking is boring and uneventful, it's just numbers on a screen, especially if you live in an area where big bank accounts are common (certain areas of big states like ca, tx, ny, etc.)
anecdote on an anecodte: when we sold our biz, i tried to transfer ownership of the account to the new owner, and the branch manager couldn't actually make that happen. he said i needed to write a letter (a physical, printed and signed letter) to the headquarters of citi. l-o-l obviously we didn't do that, so we just shut it down and cashier check deposited the balance to the new owner's account at chase - and they happened to have a branch literally 2 blocks away. i just walked in and deposited the check into his account #. the teller seemed like she did this sort of thing on a regular basis.
I wish my bankers would shut up about building a relationship, and just process these numbers. They are the car dealerships of holding money, such employees should be working on instagram not in the real economy. Human in the loop costs huge amounts of money and they only interfere.
Last time after a bank transfer that required log in, login confirmation by phone, bank transfer UI access by digit card security, bank transfer confirmation by SMS…
…she just called to check it was me. For $650.
I wish banks would just shut up and process our money.
no. it really isn't.
They should get real jobs like being influencers or something.
I'll bank again at Citi if I ever need to based solely on how easy it was to leave them.
Time Warner: "You won't stay with us over Google Fiber even if we're cheaper?"
Me: "No, because I won't have to have this stupid conversation if I decide to cancel Google Fiber."
One day I was unable to log in. After logging successfully a message popped up demanding debit card activation. Every time I pressed 'cancel' I was logged out. That lasted for months. Effectively they locked me out of online access. By then I moved everything to another bank, so it wasn't a big problem. Then I visited their branch in person and requested all my accounts to be closed. I repeated 'All of them'. They did it, or pretended. I left being sure I'm done with Citi forever. But no, they kept debit card account open, without telling me. For charging purposes, as they don't provide any services, and they know it.
If locking out (they did build and activate this functionality in their system) was the bottom of banking. Silent not closing on request and demanding money for 'service' is a scum. My recommendation: Stay away from Citi.
But yeah, it's still kind of mind-boggling that they could do this for apparently years without anyone noticing. And not just on Chase's side: how do you not notice that the money customers claim to be paying you is not actually landing in your main bank account?
He can make that trip a thousand times and never encounter any issues. Whether there’s a 1M check in his pocket is immaterial.
I opened a new account and ACHed $25k into it which triggered all sorts of "fraud alerts" and put my money in limbo for days. Ended up having to get on a three way conference call for the transfer to go through.
They’ve been chasing our business ever since we moved to SVB post Series A. They’re going to get it since we wired our money out of SVB today (not my decision), but do they deserve it? Absolutely not.
Pretty sure they are not.
If your first friend at any company isn't someone in accounting your doing it wrong.
Good accounting is not something you outsource, and a good accounting team is worth their weight in gold.
If your concerned about exchange rates, you better have competent folks in accounting.
I'm happy to believe you on that point, but can you explain WHY? It appears to me that accounting is the exact type of generalized skill with well-established standards that makes sense to outsource.
Once you get past "how much is in the checking account" and into the why attached to quantity then you get insight. What is the cost and value of a client? Are there fixed costs (acquisition, setup) and variable (AWS/Usage).
The ebb and flow of money and someone keeping an eye on it matter. Where and how you bank matters (lesson some are just learning). Hell just pricing a product internationally is a task that genuinely requires an accountant.
Go hang with accountants, learn what they do and see the insight they provide.
The company was also a VC-backed startup and is on the road to IPO, so it's run like an investment, not a cost center -- and hiring and keeping great employees is a priority. The perks and benefits are really great. It has won awards for the last ~5 years for being the "best company to work for in $region".
Financial management for startups with respect to "how big you are" is almost always "not big enough" until you have tens of millions. Both seed and series a are usually to be spent within a couple of years and hiring a full time financial manager to represent 5%-10% of payroll is just not worth it, he won't recoup his salary even by excellent trickery.
Just like everybody in tech is doing something with computers and writing code
In the post covid world, I find many young engineers fall into the trap of squeezing more yield out of their meagre savings early in their career through financial engineering rather than focusing on their personal development and growing in their actual professional lives.
All the amateur investors who made big returns in the 2020-22 period and thought they figured it out will now have a hard time making sense of the markets in the new regime of high interest rates.
Chasing big returns generally leads to massive losses so I cant fault people for sitting in cash but I dont recommend taking inflation lightly. The least one should do is beat that hurdle rate and conserve value.
Operational revenues : the real job, the thing that is making money. The yield on the operational one is
Financial revenues : cash sitting around non-invested yet into operations, waiting for the next project to invest in.
The yield on the operational revenues is much higher and the investment in it could be transposed as for example : spending for some certifications, go to online or physical classes, etc
In this case. I'd bet there are more than a few startups who would have survived if they'd spent a few hours on the phone with their bank to help manage funding cash more efficiently.
"Maximizing yield" would mean earning a few % annually in interest. "Minimizing insolvency risk" means paying a few % to ensure it doesn't go to (effectively) zero in an SVB-like situation, and requires literally a day or two of work.
However, it's difficult to fault Mitchell for knowing these things. It sounds like the VP of Finance was brought in at the right time (Series B), and did the right things.
With what Mitchell knows now, and especially given the industry's recent experience at SVB, I'd guess that he would advise any young founders he works with to cover this base at their own companies even earlier than he did.
“Enough” is likely the key word. But if you have business or personal accounts with over a couple million (and certainly $10+ million), I would be shocked if someone higher up than a clerk hadn’t personally reached out to you, tried to take you out to coffee, and let you know the perks applicable to your personal situation they can provide you that you can’t find on a website.
Sure, they likely weren’t as enticing as SVB’s perks nor as willing to lend to an account that had $0 yesterday and millions the next, but they absolutely will offer personal loans/mortgages against stock compensation on the guarantee you keep your account with them above a certain threshold, etc.
There are plenty of ways to get you in the conversational door like offering a better rate or to help protect the account.
Eventually someone from hashicorp "...notices we have ~$35M sitting in cash in a Chase bank account. This is obviously not a smart thing to do, so he suggests some financial plans for how to better safeguard and utilize this mountain of cash". The bank could have been the party to preemptively explain this to the author, and if they did they might have been able to be a part of the solution (or at least try to negotiate for it) instead of losing the entire account.
It sounds like the bank manager was being too delicate, asking the author if they had any banking needs when he didn't really think he had any. They should have been more blunt and said look dude you have a ton of money in here, you're probably not used to managing this amount of money, we need to take just a bit of time to discuss it and we'll make it easy and worth your while.
i see what you did there
Other than that, it's not clear from this story why they chose Silicon Valley Bank - it sounds like this VP of Finance is the person who could explain what (if anything) they did better than Chase.
The usual emails of credit cards, better interest on savings (money sat in the account for nothing) or others if it didn't happen?
At least from the recount there was no mention of e.g. we realised you're a big customer and we have some special packages for you. Services like AWS would immediate assign an account manager, want to know you more and offer training, assistance and all sorts of things and not just when you make a transfer.
"Hi, are you actually a startup? Because with a regular business account you're missing out on a lot of money. I would very much like to schedule a few minutes with your CFO and talk over what could be done."
Maybe he bites maybe he doesn't, but he's no longer so naïve.
Also, the implication that the Alex guy was fired or something because a customer decided to switch banks seems to only indicate that Chase has a toxic internal culture. Customers switching banks is not unheard of...
It wouldn’t be read and now Alex is spamming him.
This is the first time I hear of a situation like this, and I'm really curious.
Yes. Just like you still pay interest on a loan even if you just let the cash all sit in a bank account.
A loan is fundamentally different from a share purchase though, you can try to buy back you shares but that would be a separate negotiation.