Well, Silicon Valley Bank was seized by regulators today. What can I say but, wow! And not a good wow either. We banked with SVB in the DoBox days (our first startup). Their marketing strategy is to reach out to companies who have raised a round of funding and encourage them to bank with SVB. Something like 50% of startups do so…Well, used to do so.
In what seemed to be a matter of a few days, the startup community and the VCs, which have benefited from SVB for decades, turned on the bank, launched a serious bank run and it was seized by regulators, aka shut down.
Soooo, what happens now. Well I can tell you this, the startup ecosystem just got upended.
First of all, how many founders had the forsight to have TWO banks. We do. Just in case. Apparently having a “just in case” mindset isn’t as crazy as it might sound. Many companies with investor bank safely in their bank, no longer have access to that cash. Instead they are getting IOUs from the FDIC for the “uninsured” portion of their deposits. That’s anything over $250k. I’ve been sick thinking about what that would have meant for us when we had seven figures at SVB.
And those IOUs, nobody knows when they will be paid out – once the assets (i.e. gov’t bonds) have matured? Once the assets have been sold? (and plenty of people say that the last round of problems saw the big banks treated poorly by regulators how pushed them to buy distressed banks….)
In addition, how many of those clients of SVB had lines of credit, one of the bennies of being an SVB client that they tout. I mean, how risky is a line of credit to a venture-backed startup? And how many of those companies were banking on that line of credit to extend their runway and help them ride out the current tough times?
Imagine, all your cash, your credit lines, all gone….
VC’s are already talking and tweeting about the fact that they’re only going to help those with the best chance of success. And the terms are going to be bad. Very bad. Brace yourselves.
I just finished an article – Raising capital in a down economy – on Switch (formerly Women 2.0). It builds on an earlier post Tough Time Raising Capital? VC Investors Say it’s Going to Get Worse – Here’s What to Do! Click to read the entire article and then scroll below to get some suggestions about how to handle some tough times.
Here are some suggestions on how to strengthen your position. (See further details for each suggestion below the list).
- Start Conserving Cash! You want your runway to be as long as possible. I suggest 1 year as a minimum and 2 years as ideal – that way, if we have a soft landing or another “Great Recession”, lack of cash won’t kill your business.
- Grab Our FREE VentureWrench Crisis Capital Guide – 5 Changes In Startup Funding in a Down Economy!
- Get Super Strategic about Investors and Potential Investors including Angels and VC’s (Consider InvestorFind to help!)
- Get a Coach to help you Get the Inside Info you need to Succeed
- Consider our Newest online Course – Raising Capital in a Down Economy
- If you are planning to raise funding for your startup, Click to Get our FREE VentureWrench Guide to Investor Capital 50 pages of insider insights to help you succeed!!
1. How do you start conserving cash?
- Are you skinnying down your costs in a big way? See my concrete suggestions on ways to work down costs without destroying the business (hint you may be able to avoid layoffs if you follow my suggestion instead….)
- If you have most of a round raised, close now before terms start to get really bad (and they are going to get bad!)
- Get to market right now and start selling, selling, selling (and closing)!
- If you have some customers “on the hook”, get them closed with whatever discounts, terms or deals you can come up with. Clearly right now, Cash is King!
- Finally, If you can’t raise any capital, can you take your company into some form of hibernation, caching the technology and IP or nursing along existing customers?
2. Click to Grab Our Free VentureWrench Crisis Capital Guide – 5 Changes In Startup Funding in a Down Economy!
3. Get Super Strategic about Investors and Potential Investors (Consider InvestorFind™ to help!)
Remember our strategy – Design the Perfect Investor™, which is even more important in a down market. InvestorFind can help you find those perfect investors fast!
4. Get a Coach to help you Get the Inside Info you need to Succeed
Right now you need insider insights more than ever! Get help from an entrepreneur who has also been on the funding side – that way you get an ally with the inside scoop.
5. Consider our Newest online Course – Raising Capital in a Down Economy
We’ve captured all that experience in a new course – taking the best of “Designing the Perfect Investor™” with the insights about what happens during a downturn – a downturn in startup capital that may last for 2-3 years!
6. If you are planning to raise funding for your startup, Click to Get our FREE VentureWrench Guide to Investor Capital 50 pages of insider insights to help you succeed!!
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If you are planning to raise funding for your startup,
Click to Get our FREE VentureWrench Guide to Investor Capital
50 pages of insider insights to help you succeed!!
