Yesterday, the US experienced the second largest bank failure in history. In the world of technology, Silicon Valley Bank (SVB) was one of the largest banks supporting small businesses, but today, tens of thousands of depositors cannot access capital.
This is not the first time I have witnessed a funding crisis. I’ve been building technology businesses for over 20 years: 15 years in software/internet and five in advanced hardware. Previously, I founded Archer Aviation, which went public in 2021 for $2.7 billion. Before that, I founded Vettery, which was acquired for $110 million.
While I hope for the best, it’s important for founders and CEOs to plan for the worst. This will be the weekend that differentiates a good entrepreneur from a bad one.
In 2020, when COVID-19 hit, I was raising my Series A for Archer and the business finance environment came to a complete halt. Within 48 hours, all the meetings I had were cancelled.
While I hope the best for companies that bank with SVBs, it’s important for founders and CEOs to plan for the worst. This will be the weekend that differentiates a good entrepreneur from a bad one.
Here’s a 10-step playbook for founders and CEOs that can increase your company’s odds for success:
1. Arrive at the office
This weekend, you’re in the war room. Spend time coming up with a thoughtful plan based on the many scenarios that could play out. It is best to prepare for the worst, stay calm and execute with precision.
The goal of this session is to carefully document a plan that will expand the cash trail, establish talking points for employee communication, and identify any levers you can immediately use to save cash.
2. Create an internal tiger team of three people
This team should consist of the CEO, financial leadership, and the people who run general product and people operations. Small teams make it easy to communicate and move quickly, but a mentor who has experience navigating business cycles like this could also be helpful.
The goal of this team is to extend the remaining available cash for at least 30 days in the hope that uninsured depositors will see high recovery rates quickly. The longer your track, the better your chances of success.
3. Start communicating with investors now
In the event you need more capital than the FDIC insures, contact current investors and be transparent about your SVB exposure. Be direct: ask if they are able to transfer cash to cover your capital needs, even if it means no strings attached.
I would also start creating a list of all non-current investors in my network and be prepared to contact them on Monday morning. Work to keep track of all of this so you can stay organized in case deposit settlements take several weeks.
You will find that good investors will step in to help because they understand that this situation will not last forever. Your request is to get them to lend new money or buy rights of deposit outright. If things go wrong, you don’t want to be one of the 40,000 companies calling investors on Monday.
