
Standard Treasury Acquired by Silicon Valley Bank - BukhariH
http://blog.zactownsend.com/standard-treasury-joins-silicon-valley-bank
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jakozaur
Kudos for being honest!

I have the highest respect for detailing the real reason instead of generic
"awesome journey".

Moreover, being acquired by SVB sounds way better than average acquihire. You
actually can execute your idea, but as part of other company instead of
separate entity.

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kchoudhu
Bummer. This was the one startup I've seen over the last few years on HN that
I was actively rooting for.

Blame the Fed, I guess? De novo charters aren't being handed out anymore
apparently, so you either have to acquire a charter, or be acquired. It's a
pity VCs don't have the gumption to play the game, so Standard Treasury ended
up going with the latter route.

~~~
i2pi
De Novo charters are available, but in very limited supply. I think there have
been maybe 5 new charters since the crash. Prior to 2008, 100's were issued
annually.

The problem with acquiring an existing bank is that for any tech company, you
are likely to be changing the business purpose of the acquired bank, so you'll
need to basically go through the de novo process again.

Either way, you're looking at 5+ years to get a charter that you can use to
run any new digital banking business.

And then there are the capital requirements. The capital required to launch a
Bank is tremendous. You need to have sufficient capital against your projected
future deposits. Way out of the range of VCs. And only a limited number of PE
firms play in that space.

And even if VC's did have the financial resources, the returns are dismal.
Chartered banks, particularly new charters (either de novo, or acquired for a
new business purpose) are limited in their growth. A very fast growing bank
might grow 50-100% yoy. The return on capital equation just doesn't work out
for VC capital.

It doesn't make much sense either for PE firms, given the limitations imposed
by the Bank Holding Company Act.

tl;dr, this shit be hard.

~~~
dragonwriter
> De Novo charters are available, but in very limited supply.

Is it limited _supply_ or limited _demand_? While I've seen some articles
pointing to higher FDIC standards, I've seen others indicating that the market
conditions that are historically linked to high levels of _de novo_
applications simply haven't existed since the crash, though there are some
signs conditions are edging toward them.

> Prior to 2008, 100's were issued annually.

Prior to 2008, those new banks were almost without exception chasing the then-
booming real estate loan market, whose collapse was a central element of the
crash. Those hundreds annually in the years just before the crash were a
symptom of the bubble that was about to burst.

~~~
i2pi
The standards are now much higher, which may be limiting demand. It is far
less attractive to apply for a new charter when your growth is curtailed and
examinations are more intense and frequent for your first _seven_ years of
operation.

You're right on the prior to 2008 comment, but it was indicative that any bum
and their mortgage broker could get a charter. But tech companies who are
(hopefully?) less shady, can't.

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kumarski
Please fix Silicon Valley Bank.

They send passwords in plain text!!!! WTF!!!!!!!!!!!!

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vangale
It's interesting going back and looking at their pitchdeck now:
[http://blog.zactownsend.com/standard-treasurys-series-a-
pitc...](http://blog.zactownsend.com/standard-treasurys-series-a-pitch-deck)

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manishsharan
As a techie in the banking industry, I have to say I am very disappointed. I
wish they had persevered with their initial product and expanded on that
instead of trying to become a bank. There is a huge market for banking
software -- for skilled sales teams and they certainly proved their mettle
judging by their sales success . There are several companies that have done
very well by staying focused and selling solutions to the banking sector. edit
- typo

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jayzalowitz
It sucks that you guys couldn't get going independently. I was looking forward
to seeing you guys do some damage to finance.

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zekevermillion
This shows the danger for any financial services business that relies on a
third-party platform. Due to the steep costs of compliance, and of dealing
with legacy tech of existing banks that are the platform's customers, there is
always a good chance that any particular payments platform is going to be
acquired by a bank, or by a larger payments company. When that happens, the
goals of the new owner will not always be to continue supporting a platform
that benefits their competitors.

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pbreit
Hopefully they can structure the deal in such a way that the team remains
incentivized both financially and passionately. This actually seems like the
right way to do it: find a progressive bank willing and able to let a team
come in and modernize some functions. My recollection is that SVB online
capabilities were pretty dismal so there's not a whole lot to lose. SVB would
be a much more attractive player with better DDA functionality.

~~~
ci5er
> SVB would be a much more attractive player with better DDA functionality

They would be an even more attractive partner if they didn't always throw a
wrench in the works when you are trying to do an orderly liquidation of your
company. It's pretty horrible when you realize that Chase had been a (much!)
better banking partner. They talk a good game, though.

~~~
pbreit
I'm not sure I would optimize for liquidations.

~~~
ci5er
Sure. I was just making the point that as a business partner, they have a lot
of things beyond a DDA offering that they need to fix.

When you are trying to get 100% of the investor's money back after a hard run
that didn't make, it makes one feel a bit raw to have sand thrown in your
gears in process. And the cool thing about getting investors whole is that
they'll show up to your next party. If I had remained a fan of SVB, the
investors would not have allowed them back at the table after some of the
things that occured. If all that SVB is is money, I can that from GE Capital.
I start to question what value they are bringing to the table.

I know-- anecdote is not data and all that.

None of this is meant as commentary against what's going on in the head-line
story. I could see this being a solid win for both parties. Yay. I like happy
middle-ings.

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psawaya
Congrats Zac! Really respect the transparency in sharing your pitch deck and
acquisition story.

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kumarski
Oh and Congrats!

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kev6168
The name 'Standard Treasury' is a little bit on the grandiose side to be
honest. 'Standard Markdown'? :-) In some culture, people deliberately give
their little children rustic/ugly/low-key names in the hopes of being deemed
worthless by the devils and thus left alone during the growing up. Not I am
saying the name has something to do with the current affair.

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thinkcomp
I called it four years ago. Financial innovation is dead and money
transmission laws are directly to blame.

[https://thinkcomp.quora.com/In-Fifty-Days-Payments-
Innovatio...](https://thinkcomp.quora.com/In-Fifty-Days-Payments-Innovation-
Will-Stop-In-Silicon-Valley)

~~~
liquidise
Bullcookies. Transmission laws are the cause of both the stagnation and the
innovation. Innovation is literally people finding new ways around established
methods.

Put a blockade up, and people will innovate around it. Engineers are not known
for going gently into that good night.

~~~
thinkcomp
And your evidence for this wild notion--that money transmission laws spur
innovation--is?...

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dublinclontarf
Bitcoin?

~~~
thinkcomp
...except that A) Bitcoin doesn't get _around_ money transmission laws, it
causes large numbers of people to inadvertently _violate_ them; B) that's why
Coinbase had to completely shut down in Wyoming as I recall; and C) is anyone
seriously suggesting that Satoshi Nakamoto took a look at some state money
transmission statute or 18 U.S.C. § 1960 and decided to create Bitcoin as a
result? If so, that would be the first time I've heard that.

