It was a weekday like any other, just about a week ago, when someone from my network called and told me there were murmurs regarding Silicon Valley Bank. Little did I know then that in just a week, all of us startup founders would be put through an emotional wringer and that the bank associated with all of us in the startup world would collapse.
I have had a long association with SVB and had used them as the banker for my previous startup, Zarget. So when the faint market murmurings were first conveyed to me, I reached out to SVB and got a detailed response, assuring me with data about their assets and liquidity. I decided to stay put.
Digital perfect storm
On March 9, I got an alert from a close partner of my startup: SVB is in trouble. Every single one of our advisors recommended one thing: Get your money out, now.
We had only about 10 percent of our working capital in India. So my team and I transferred some money to India and some to Brex. We quickly de-risked about 45 percent of the money.
It was not a smooth or easy process and as I was doing this, it was like a dam had broken. I kept getting calls and WhatsApp messages from friends, acquaintances and well-wishers in the startup world, asking if I had already gotten the money out or seeking advice.
I realised this was becoming a digital perfect storm – every founder and startup with money in SVB was trying to get their money out. This had become a bank run and I knew we had to get the remaining money out.
This was the evening of March 10 and our account was frozen. No one with an account in SVB could get any money out. If I thought I had seen panic in the startup world, I was about to be corrected.
The calls increased, so did the messages and emails. Everyone was worried. Founders, senior executives, investors, and others across time zones were awake, working the phone lines, exchanging notes and seeking advice on what’s happening and what to do next.
There were two real issues at that time – uncertainty and disinformation. Both were around in heaps.
"No money for one to two years"
Someone in a founder group chat said people were not going to see any of the money for at least one to two years. Someone else said only after SVB assets were liquidated would the money reach depositors with over $250,000 in the bank.
It was brutal in the founder groups.
My first instinct as a founder was to see how much runway we had for business continuity. We were in a good position with a runway for over a year.
Unfortunately, others were not in a similar position. Another founder, who had raised a significant sum of money, only had a runway for a couple of months – the rest was stuck in the bank. Yet another founder’s entire personal savings was also in SVB.
Everyone wanted to help, all at once, but no one really knew what to do. There was no official information coming through.
Do not panic!
There is a saying that if you want everyone to panic, tell them not to panic! Here, of course, after the initial calls for calm, everyone was in full-blown panic mode and suggesting that everyone do just that: panic. I must admit that when the account was frozen, I panicked too.
But after a few minutes of that, survival instincts and clarity kicked in.
What was happening within SVB, what others were doing, and the rumours that were spreading – I could not do anything about that. But there were things that I could do and I decided to focus on them. We moved incoming customer payments and moved our outgoing payments to other banking sources so our business continuity was not affected.
I was also fully cognizant of all the rumours spreading on Twitter and through the startup grapevine. So I communicated with the SuperOps.ai employees, gave them a clear picture of where we were and what’s happening so that they would not get worried. And, I am really grateful to the whole team because they were supportive.
However, outside this cocoon, speculation continued to fly, and founders and others continued to relay information, most of which was mere hearsay or worse, plain untruths. There was a lot of unnecessary noise and chatter – someone said they were able to take money out when the fact was everyone’s accounts were frozen.
But, for the most part, founders were just trying to make sense of what was happening and trying to figure out if everyone was in the same boat. So, I decided to unplug from the noise and I decided to wait and watch. Because, frankly, that is what most of us could do.
Finally, a silver lining
We were hoping for some clarity on March 13. But the US government moved with alacrity. By March 12 evening, the US government and the Federal Deposit Insurance Corporation said all SVB depositors would be able to access their money on March 13. This was the best outcome we could hope for.
I was truly impressed with how the FDIC and the US government acted. They assured the founders and startup and tech employees on future steps. Importantly, they communicated and resolved the issues overnight, over the weekend, before the markets opened. They definitely prevented a bloodbath in the banks and in the markets. I cannot reiterate enough just how well this was handled by the regulators and authorities.
Hindsight is 20-20
Now, the money is back and the money is safe and it’s all good. But that one moment, when I realised that money is there in the bank and my startup is doing well, but the money is stuck and I can’t do anything about it, it was truly like my whole life flashed in front of my eyes. All I could think of was - what will I tell my employees?
Now that this is behind us, thankfully, I have realised:
- It is very important to diversify the money. Even the strongest bank has risks.
- No matter how small you are, have a business continuity plan.
- While there is strength in numbers, we should not display herd mentality. As founders, we are part of many groups and communities and we should treat the information we get with responsibility. Verify the information before sharing.
I think as founders we are natural optimists, but we do need to cultivate a tinge of pessimism so we are prepared for eventualities. In hindsight, many founders just put unnecessary pressure on themselves, trying to control something they just couldn’t.
The greatest lesson I would say is that you can’t plan for everything – a lot can be achieved by staying calm and knowing that you can’t control everything. I am glad we have all emerged out of this unscathed, but we do need to come together as an industry to ensure these events don’t recur.