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The venture capitalists who pleaded their way into a federal bailout earlier this month want you to know that they were just sticking up for the little guy.
Sure, this small clique of financial arsonists may have precipitated a run on Silicon Valley Bank (SVB) that mainly threatened their own startups. But to hear them tell it, the casualties would have been widespread.
As Mark Cuban suggested on The Problem with Jon Stewart, the FDIC guarantee for Silicon Valley Bank depositors was for all those poor mom-and-pop businesses, which had the misfortune of holding more than $250,000 in cash at a bank known predominantly for a clientele of crypto pitchmen and tech startups. Without federal assistance, you see, the small and vulnerable would suffer.
VC luminary David Sacks, who was one of the most active agitators for the bailout, has led the charge, crowdsourcing sob stories from his network of investors that just happen to fit this counternarrative. Sacks was a college classmate and a former PayPal associate of Peter Thiel, whose Founders Fund helped spark the run.
In a March 15 Twitter post, Sacks posted screenshots of an email he received from “a small non-profit school” 3,000 miles from Silicon Valley that banked with SVB. The board of trustees member who sent the email claimed that the school wouldn’t have been able to make payroll the next week had the FDIC not secured their uninsured deposit. The stated intent of the email was to help Sacks demonstrate that SVB’s client base is “more diversified than the media narrative has allowed.”
“If they hadn’t gotten access to their funds, teachers would have been laid off. These are the kind of innocent bystanders you create if you don’t protect deposits,” Sacks wrote.
Sacks redacted both the name of the school and the email address. But enough key details remained for the Prospect to decipher its identity. The nonprofit school in question owned a working farm on campus, took out a municipal bond, and had a board of trustees member with the letter “D” (per the Gmail icon) who knows Sacks. And of course, the school banked with SVB.
All these identifiable characteristics point to the North Country School, an elite private boarding school in upstate New York with an annual base tuition of $62,000, greater than both Yale and Harvard. The elementary and middle school holds a multimillion-dollar endowment and total assets equivalent to the size of a small college. Essex County, New York, documents show receipts from the school’s banking account at Boston Private Bank, acquired by Silicon Valley Bank in 2021. Boston Private Bank is also listed as the bondholder for a $7 million municipal bond the county issued to the school in 2019, according to county records and the school’s most recent 2021 tax filings.
Tucked away in the Adirondack Mountains, the school’s sprawling 220-acre campus contains not only a working farm but also a ski slope, rock climbing range, and campsite. North Country offers its roughly 90 students an alternative education featuring experiential and outdoor learning. With no standard grading system until the eighth grade, the academic curriculum entails regular farming, wilderness trips, horseback riding, and even maple sugaring.
The Prospect spoke with North Country School’s chief financial officer, who was unaware of anyone on the board of trustees reaching out to Sacks. CFO Fritz Sabbow was able to confirm that the school owned a working farm, took out a municipal bond in 2019, and held an account with Silicon Valley Bank.
“I’m just a little concerned with the Twitter feed on this topic,” Sabbow wrote to the Prospect.
The board of trustees member with the letter “D” is presumably David Stewart, a partner at venture capital firm LiveOak who previously worked as VP of product at Yammer, a startup co-founded by Sacks and later sold to Microsoft. Stewart lists his position as a trustee at North Country School on his LinkedIn page, serving specifically on the finance and investment committees.
On Twitter, Stewart liked Sacks’s post about the nonprofit school, along with other tweets by venture capitalists and fund managers calling for the bailout, such as Bill Ackman and Balaji Srinivasan. Stewart and Sacks both follow each other on Twitter. Stewart did not respond to repeated requests for comment from the Prospect.
North Country School’s board of trustees sports a roster of high-net-worth individuals, connected to the upper echelons of the corporate and entertainment world, New York finance, and philanthropy. On North Country’s 22-member board, new money and old money rub elbows.
A former managing director at JPMorgan sits next to an ex-Google executive, joined by a descendent of the von Trapp family of Austrian nobility, and the heir to the Welch’s grape juice fortune. The board also includes the son of literary icon J.D. Salinger and a Hollywood actress who appears on Law & Order.
The school’s alumni are just as upper-crust. Several Rockefeller children attended the school, as did the daughter of the Aga Khan family, which claims direct lineage to the Prophet Muhammad.
Stewart is just one of the board’s members and alumni who hail from the financial and business world around New York City. In the email to Sacks, the note reads: “It would be unreasonable to expect a small educational institution to be liable for assessing the risk management practices of a major bank.” Yet, several of the school’s board members and largest donors are intimately familiar with the workings of large financial institutions. The board’s chair himself is a corporate executive who sat on the board of an alcohol delivery company sold to Uber.
It seems not unreasonable, in fact, to expect a school board that manages over $30 million in total assets and over $3 million in donor contributions in 2021 to have a risk management strategy in place to secure its bank deposits. The school brings in more revenue annually, at $9 million, than the endowment of North Country Community College up the road.
The author of the email suggests that the school’s hands were tied. It states that “the school held its liquid operating assets at the bank, as was required under the terms of a bond it had taken out” with Essex County. The county’s listed records and deeds of the deal do not readily verify that statement, though it does require that bond repayments be made through an account at the bondholder Boston Private Bank, as approved by the school through direct debiting. The agreement also asks for a liquidity-to-debt ratio on behalf of the school. The Essex County Industrial Development Agency could not be reached before the publication of this article for comment on the details of the agreement.
Any financial adviser would tell you that it’s inadvisable for a business to keep all of its funds in a single, non-FDIC-insured deposit account, especially without acquiring available insurance such as through cash sweeps.
The email’s central claim to Sacks is that, without the FDIC backing, the school would have been unable to pay schoolteachers and other staff.
“These are modestly paid workers who tend not to have a lot of savings to fall back on,” the author wrote.
North Country’s extensive donor and alumni list, and annual contributions in the millions of dollars, seems to belie that inevitable fate. In the year 2021-2022, donors included both the charity arms of investment manager Vanguard and the financial services giant Fidelity, along with a host of philanthropic powerhouses such as the J.M. Kaplan Fund.
There were 11 donors with contributions over $50,000 and eight between $25,000 and $50,000. In the scenario of a temporarily unavailable deposit account, or even the relatively small haircut that might ensue after FDIC resolution, the school’s board had a well-endowed network to fall back on, not even including its other nonliquid assets and savings.
The broader point is that David Sacks couldn’t find a mom-and-pop institution to justify his cockeyed version of reality without turning to a VC colleague’s ultra-rich boarding school. Sacks did not respond to a request for comment to clarify whether he knew any of this information about the “small non-profit school” before posting about it on Twitter.
While upstate boarding schools like North Country receive government backing of their finances, New York state and city schools face ongoing budget cuts, with no federal assistance in sight. The State University of New York system is dealing with a deep deficit, and New York City is likely undergoing another round of cuts and teacher layoffs. Even after a court intervened to block Mayor Eric Adams’s austerity budget plan, the school system still lost a net $469 million in funding, according to City Comptroller Brad Lander.
On the Tuesday after the FDIC intervened to protect SVB deposits from supposed calamity, North Country posted a job listing for a 12-month farm internship with a stipend, paid time off, and health insurance.
