A 10-step guide for founders with bank accounts in Silicon Valley
Yesterday the United States the second largest banking failure in history. In the tech world, Silicon Valley Bank (SVB) was one of the largest banks supporting small businesses, but today tens of thousands of depositors lack access to capital.
This is not the first time I have witnessed a funding crisis. I’ve been building technology companies for over 20 years: 15 years in software/internet and five years in advanced hardware. Previously, I founded Archer Aviation, which sold for $2.7 billion in 2021. 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. It will be the weekend that separates a good businessman from a bad one.
I raised my Series A for Archer in 2020 when COVID-19 hit and the VC funding environment came to a complete standstill. Within 48 hours, every single one of my appointments was cancelled.
While I hope for the best for companies that work with SVB, it’s important that founders and CEOs plan for the worst. It will be the weekend that separates a good businessman from a bad one.
Here’s a 10-step guide for founders and CEOs that will increase your company’s chances of success:
1. Meeting in the office
This weekend you are in the war room. Take the time to develop a thoughtful plan based on multiple scenarios. It’s best to prepare for the worst, stay calm, and execute with precision.
The goal of this session is to carefully document your plan to expand your cash footprint, create talking points to connect with employees, and identify any levers you can pull immediately to save money.
2. Creating an internal tiger team consisting of three people
This team should consist of the CEO, the CFO, and people who manage the overall operations of products and people. Small teams make it easier to communicate and act quickly, but a mentor with experience in these economic cycles can also be helpful.
The goal of this team is to extend the remaining cash for at least 30 days with the hope that uninsured depositors will quickly see very high rates. The longer your lead, the better your chances of success.
3. Start communicating with investors now
If you need more capital than the Federal Deposit Insurance Corporation (FDIC) provides, reach out to existing investors and be open about SVB’s risk. Be direct: Ask them if they can lend you money to cover your capital needs, even if there is no such thing.
I will also start making a list of all the non-current investors in the network and will be ready to contact them on Monday morning. Try to keep track of all of this to stay organized in case the deposits take weeks to clear.
You will find that good investors will step in to help you because they understand that this situation will not last forever. Your request is to lend them new money or buy the deposit claims outright. If things go wrong, you don’t want to be one of the 40,000 companies pitching to investors on Monday.
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