Why I pulled my startup’s money from SVB the day before the collapse–and what lessons banks and entrepreneurs should learn
Exactly 14 days before Silicon Valley Bank (SVB) collapsed–and 13 days before I withdrew my company’s funds from SVB–I read a market report. Published by SVB, the otherwise routine report illuminated a concerning reality for startups. Startups have less cash on hand, which means less runway. Additionally, the average length of time between financing rounds is greater now than at any point in the last three years. Growth has slowed. And valuations have taken a big hit.
Of course, it’s no surprise to any founder or CEO that the fundraising market has been challenging. But seeing the extent of the softness was a stark reminder of just how rough it was out there.
So, you may be wondering… Did I have a crystal ball? Did I connect the dots between startups having less cash, and SVB (which was unofficially the “bank of startups”) having dwindling deposits and a liquidity crisis two weeks later? Did I see this coming?
No. I’m not sure anyone could have.
But as the rapidly developing rumor mill whirled through startup circles late last week, I wasn’t comfortable taking a risk or hedging my bets. A wait-and-see approach wasn’t going to cut it. On Thursday morning, I pulled out nearly all of Little Spoon’s cash that was deposited with SVB.
Core to how I lead is putting who I serve first: my employees, my customers, and my investors. The livelihoods of our team and the tens of thousands of families who come to our website every week for their children’s meals may have depended on this decision. So I acted fast and got us out. That choice saved my company from the gut-wrenching tailspin that many others had to endure in recent days–and it could have very well saved us from absolute disaster.
I still remember the first meeting I had with SVB. It came shortly after my co-founder and I waited in line at a Wells Fargo branch for 45 minutes to simply get an appointment to send a wire, only to sit through another 45 minutes of tedious paperwork while we simultaneously endured an unprompted mortgage pitch.
SVB was different. They believed in big ideas and were readily willing to place bets on founders of early-stage businesses that a normal bank would simply never make. They weren’t just the largest, most prolific bank to startups and venture-backed companies in the world, SVB was also a go-to for sharing insights and community-building, and offered tremendous best-in-class service.
It was truly special. And unfortunately, we are now left with a big void in the startup ecosystem.
Where do we go from here? What can we learn as Americans, as founders, and as individuals who quickly rallied around the brands we love in the wake of the shutdown late last week?
As I reflect on the insanity of the last few days, a few learnings come to mind.
We must double down on the importance of our work.
Startups play a critical role in challenging the status quo and demanding better. That work is big and it means the potential for a better life for the masses. It’s time for big banks, large companies, and the government to lean into this reality.
Just take my business. The market for baby and kids’ food has been plagued with quality issues, trust concerns, recalls, and a lack of regulation. This can’t be the norm and it sure as hell is not what more than 11 million parents and 40 million children in the U.S. deserve.
Facing the prospect of seeing so much loss in the startup space meant staring down the possibility of massive steps backward for society at large. We can’t let that happen.
The startup community is loud and fierce
If we needed a reminder of how passionately we believe in one another, a bank run sure did the trick. Countless text threads, email chains, and efforts to help spread the word on startups in dire need of funds–this small, but mighty community knows how to act fast, launch campaigns, and within a mere few hours rally the masses.
We proved how quickly we could unify efforts and support one another. Let’s not lose that. It’s certainly not lost on me how easily Little Spoon could have been in the precarious position so many startups found themselves in the last few days. The truth is, there are countless companies out there who share our mission to make parents’ lives easier, or, perhaps, their missions are even more noble. Let’s help like-minded companies so we can all have even more impact.
The worst can happen.
You’d think we’d learn this from the pandemic, but memories are merciful to us. This shutdown seemed unfathomable, but here we are on the other side, looking to a new uncertain path forward. It’s never been more critical for founders to have contingency plans in place and a range of solutions at the ready in case of, well, who knows what. A few bank accounts can’t hurt, either.
Fortunately, this situation is not as dire as initially feared and founders can breathe a collective–albeit hesitant–sigh of relief.
As for the future? One thing we’re great at is imagining its potential. None of us will stop dreaming anytime soon.
Ben Lewis is the CEO and co-founder of Little Spoon.
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