Yesterday the US It experienced the second largest bank 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 have no access to capital.
This is not the first time I have had to deal with funding. I’ve been building technology businesses for over 20 years: 15 years in software/internet and five in advanced hardware. I previously founded Archer Aviation, which went public in 2021 for $2.7 billion. Before that, I founded Vetery, which was bought 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 separates the good entrepreneur from the bad.
In the year In 2020, when covid-19 hit, I was completely shelving my Series A for Archer and the venture funding environment. Every meeting I had within 48 hours was cancelled.
While I hope for the best for companies working with SVB, it’s important for founders and CEOs to plan for the worst. This will be the weekend that separates the good entrepreneur from the bad.
Here’s a 10-step playbook for founders and CEOs that will increase your company’s chances of success:
1. Go to the office
This weekend, you’re in the war room. Spend your time building a thoughtful plan based on the many scenarios that can play out. It’s good to prepare for the worst, stay calm, and do it right.
The goal of this session is to carefully document the plan that will extend the cash runway, develop talking points for employee relations, and identify any levers to pull immediately to save money.
2. Build an internal three-person tiger team
This team should include the CEO, financial leadership, and people who run overall product and people operations. Small teams make it easier to communicate and move quickly, but a consultant with experience navigating such business cycles can also be helpful.
The goal of this group is to extend the remaining funds on hand for at least 30 days in the hope that uninsured depositors will quickly see higher recovery rates. The longer your runway, the higher your chances of success.
3. Start communicating with investors now
If you need more capital than Federal Deposit Insurance Corporation (FDIC) insurance, contact existing investors and be clear about your SVB exposure. Be direct: Even if there is no contract, ask if they are in a position to make a cash transfer to cover capital needs.
I would also start building a list of every non-current investor in the network and prepare to meet with them on Monday morning. If the deposit settlement takes several weeks, work to keep track of all of these so you stay organized.
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 have them lend you new money or buy a direct deposit request. You don’t want to be one of the 40,000 companies calling investors on Monday if things go south.