I think the fact that a bank called "Silicon Valley Bank" collapsed is really breaking a lot of people's brains. The big tech companies (and other big companies) have treasury departments that manage short and long term cash. The companies that are impacted by the current banking instability are largely small (and some medium) businesses that generally only manage cash reserves for short term expenses. The tech companies that were impacted are largely startups that are depositing their runway which they generally quickly burn through. Many of these startups are small enough to not even have a CFO, let alone a treasury.
But it's not a tech startup-specific problem - it's a small business problem. Signature Bank (collapsed) and First Republic Bank (barely hanging on) largely handle bread and butter small business accounts. These are companies that just need a place to store cash that they use for payroll and recurring business expenses. Many of SVB's customers were also non-tech small businesses.
One SVB customer interviewed here in Boston was an electrical contractor. I'm not sure that it's wise to expect electrical contractors to have CFOs and treasury departments to "mitigate counterparty risk" with their banks if you want to have functioning small businesses in your community.
Not sure of the relevance of the last line of your comment, but it's wrong. A bank run can either be the cause or the effect of bank insolvency. My point was that there's no real orderly way of noticing that a previously healthy bank is now unhealthy and transferring out your money. As soon as the bank is believed to be unhealthy you get a run and near-instantaneous collapse, as we have been seeing. Notice that I used the words "healthy" and "sound" and not "solvent." Any bank will become insolvent in a bank run.
But it's not a tech startup-specific problem - it's a small business problem. Signature Bank (collapsed) and First Republic Bank (barely hanging on) largely handle bread and butter small business accounts. These are companies that just need a place to store cash that they use for payroll and recurring business expenses. Many of SVB's customers were also non-tech small businesses.
One SVB customer interviewed here in Boston was an electrical contractor. I'm not sure that it's wise to expect electrical contractors to have CFOs and treasury departments to "mitigate counterparty risk" with their banks if you want to have functioning small businesses in your community.
Not sure of the relevance of the last line of your comment, but it's wrong. A bank run can either be the cause or the effect of bank insolvency. My point was that there's no real orderly way of noticing that a previously healthy bank is now unhealthy and transferring out your money. As soon as the bank is believed to be unhealthy you get a run and near-instantaneous collapse, as we have been seeing. Notice that I used the words "healthy" and "sound" and not "solvent." Any bank will become insolvent in a bank run.