Published on March 28, 2023
Will the run on Silicon Valley Bank speed changes in the economy or the way you bank?
The collapse of a relatively small, venture-focused financial institution, now acquired by First CItizens Bank, has broad implications for startup marketing, business-to-business public relations and business resilience. The run on Silicon Valley Bank (SVB) disrupted business operations for tech startups, boutique banks and their small and midsize business clients.
So what’s the bottom line? New and established ventures spend an enormous amount of time raising and earning capital–and they work with PR and branding professionals like us to ensure they are known. They shouldn’t have to worry about where to park their money in the United States, one of the richest countries in the world.
A Harvard Business School webinar gives marketing and PR professionals a window into this financial crisis and its continuing impact. Organized by the early-stage investor group HBS Alumni Angels, the webinar provides an outstanding starting point for crisis communication professionals.
Seed investor Jeff Bussgang gives a firsthand perspective on how SVB’s unraveling played out in his Flybridge portfolio. Professors Sam Hason and Robin Greenwood share thoughts on how the SVB bailout is freezing capital markets and affecting future government actions.
This is one of the best webinars that we found in terms of laying out the problems, risks, failures and sound advice about what’s next. Bussgang’s firm and portfolio companies were all banked with SVB, and his play-by-play breakdown of how they managed the situation is thrilling. Hanson’s diagnosis of risk and failures is enlightening, as well as his tactical advice for banking your money.
Interestingly, Bussgang also noted that SVB was a rare source of support for women- and minority-owned businesses. The VC herd mentality threatens not only minority founders’ ability to tap venture capital funding but also the continued strength of capital markets:
“We need more diversity in the venture capital ecosystem. We need more diverse checkwriters, and that will lead to a more diverse founder network. We were making some progress on that front. SVB was an important part of that progress. I’m quite worried about that now.”
Jeff Bussgang, General Partner, Flybridge
Stress Test for Banks–and Their Clients
Here we have intentionally not summarized the full conversation–it’s really worth listening to. Hanson is particularly insightful, since in 2009 he worked at the U.S. Treasury Department as a special assistant and liaison to the president’s National Economic Council. He noted that interest rate squeeze on the bank was a highly plausible scenario that wasn’t anticipated in the Federal Reserve’s banking “stress tests.”
The SVB collapse was a stress test of a different sort for the bank’s clients, who lost access to their deposits–a temporary yet critical situation for companies trying to meet their payroll. The frozen funds were a warning to that business leaders must spend more time on banking relationships, particularly in real estate and other sectors that rely on regional banks. Bussgang had solid advice for entrepreneurs take a closer look at diversity throughout their supply chains:
- Open an account with a money center bank and get at least a couple months of payroll into that account, if not the entire entire business.
- Explore service relationships with local or regional banks that will be more responsive than the big banks to small business needs.
- If you have money at SVB, sit tight. Government backups have made it incredibly safe.
Replay the Harvard webinar and access a transcript on Vimeo.
Financial news media also have been unpeeling SVB’s financial woes layer by layer. For example, Bloomberg has provided multiple takes on the collapse, and its effects in real estate and other sectors, in its Odd Lots and Money Stuff columns; NBC News provided an early perspective from Black and immigrant founders.
As trusted communications advisers, Purpose Brand helps corporate communications, new ventures and entrepreneurs:
- Brand and build awareness–you need it when you are raising money;
- Strengthen their corporate purpose; and
- Communicate environmental, social and governance practices.
While these objectives are important, even more so is the hard work it takes to build a business and maintain banking relationships.
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