Yesterday, the United States It witnessed its second largest bank failure in history. In the tech world, Silicon Valley Bank (SVB) was one of the biggest banks backing small businesses, but today, tens of thousands of depositors are unable to access the capital.
This is not the first time I have witnessed a financing crisis. I’ve built technology businesses for over 20 years: 15 in software/internet and five in advanced hardware. Previously, I founded Archer Aviation, which went public in 2021 for $2.7 billion. Prior to that, I founded Vettery, which was acquired for US$110 million.
While I hope for the best, it is important for founders and CEOs to plan for the worst. This will be the weekend that separates the good businessman from the bad.
In 2020, when COVID-19 hit, I was raising my first series for Archer and the venture funding environment just came to a grinding halt. Within 48 hours, every meeting I was in was canceled.
While I hope for the best for banking companies with SVB, it’s important for founders and CEOs to plan for the worst. This will be the weekend that separates the good businessman from the bad.
Here’s a 10-step handbook for founders and CEOs that can increase your company’s odds of success:
1. Go to the office
This weekend, you’re in the war room. Spend time building a thoughtful plan based on several possible scenarios. It is better to prepare for the worst, calm down and execute accurately.
The goal of this session is to thoughtfully document a plan that will extend the cash runway, establish talking points for employee communication, and immediately identify any levers you can pull to conserve cash.
2. Build an internal tiger team of three
This team should consist of the CEO, the finance leadership, the people who lead the product operations, and the people in general. Small teams make it easier to network and move quickly, but a mentor with experience navigating business cycles like these can also be helpful.
The goal of this team is to extend the funds remaining in the fund for at least 30 days in the hope that uninsured depositors will quickly see high recovery rates. The longer your runway, the higher your odds of success.
3. Start communicating with investors now
If you need more capital than the FDIC can insure, contact existing investors and be transparent about your SVB exposure. Be direct: ask them if they’d be in a position to transfer money to cover your capital needs, even if it means no strings attached.
I will also start creating a list of every non-existing investor in my network and be ready to contact them on Monday morning. 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 know that this situation will not last forever. Your question is to get them to lend you new money or buy deposit claims outright. If things go south, you don’t want to be one of the 40,000 companies calling investors on Mondays.