Yesterday, the US experienced its second largest bank failure in history. In the technology world, Silicon Valley Bank (SVB) was one of the largest banks supporting small businesses, but today tens of thousands of savers have no 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 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 that founders and CEOs anticipate the worst. This will be the weekend that separates a good entrepreneur from a bad one.
In 2020, when COVID-19 hit, I increased my Series A for Archer and the venture capital environment came to a complete standstill. Within 48 hours every meeting I had was cancelled.
While I hope for the best for companies banking with SVB, it’s important that founders and CEOs plan for the worst. This will be the weekend that separates a good entrepreneur from a bad one.
Here’s a 10-step roadmap for founders and CEOs that can increase your company’s chances of success:
1. Go to the office
You’ll be in the war room this weekend. Spend the time building a thoughtful plan based on the many scenarios that could arise. It’s best to prepare for the worst, stay calm and execute accurately.
The goal of this session is to thoughtfully document a plan that extends the cash runway, establish talking points for communicating with employees, and identify any levers you can use immediately to save cash.
2. Build a three-person internal tiger team
This team should include the CEO, finance leadership, and people who lead overall product and people operations. Small teams make it easier to communicate and act quickly, but a mentor experienced in navigating business cycles like this can also be helpful.
This team’s goal is to extend the remaining cash for at least 30 days, hoping that uninsured depositors will soon see high recovery rates. The longer your runway, the greater your chance of success.
3. Start communicating with investors now
If you need more capital than the Federal Deposit Insurance Corporation (FDIC) insures, reach out to current investors and be transparent about your SVB exposure. Be direct: Ask if they can transfer cash to cover your capital needs, even if it means no conditions.
I would also start by compiling a list of all non-current investors in my network and be prepared to contact them by Monday morning. Work to keep track of all of this so you can stay organized in the event that the down payment takes several weeks.
You will find that good investors will help because they understand that this situation will not last forever. Your question is to let them borrow new money or buy deposit claims outright. If things go wrong, you don’t want to be one of the 40,000 companies calling investors on Monday.