My 2c
#CapitalAtRisk
SVB → HSBC
I’m sure you don’t need more ‘hot takes’ on the Silicon Valley Bank (SVB) failure and subsequent save (in the UK anyway) by HSBC1, but…
With the news of HSBC stepping in a lot of congratulations are due, not least to Dom who organised founders and investors, gathered the data about their situations and lobbied HM Government to make something happen.
It’s a good result because the alternative would have been an utter disaster. Therefore, it is also a time to recognise that without the HSBC deal many companies and investors, as well as others that they deal with, would have likely gone bust. History won’t repeat itself — what led to SVB failing won’t happen in the same way again — but it will rhyme. Another bank will fail. By having too many eggs in too few baskets people and companies will unnecessarily lose money. By thinking, “Phew, the government saved this one” and putting off acting will not mean that the government or anyone else will save the next one.
If in doubt, raise your standards
Now the dust is settling, founders and startup investors can ask themselves what they’ll do differently in the future. There’s also the chance to ask what opportunities are available as a result of the drama. For one, there’s the opportunity for founders and investors to help their teams and their peers learn more about banking. How do banks actually make money? What does good Vs bad look like? How does a run on a bank happen and what does it mean once it’s happening or happened?
Another idea could be to talk to some founders who did and some who did not have money with SVB. How did they make their decision at the time for who to bank with and what are they doing differently now?
Last week some startup investors suggested that their portfolio companies pull their money out of SVB, and some said don’t do that as that’s the very thing that would cause a run on the bank. Who was right? There’ll be another run on another bank in the future so how and when will you act? Will you wait for someone to tell you what to do or have you identified a trigger to act for yourself?
Think about and discuss the second order consequences — if a bank or any other institution fails, do you or your portfolio have access to other banking facilities? What’s the right account balance to have and across how many banks? Now that SVB deposits seem to be saved, how will CEOs behave and how will this strengthen or weaken companies?
As ever, there’s nothing to be gained from complaining or expecting sympathy after the event — the grittiest founders will think, prepare, act and find a way that works.
In other news
If you’re keen to be an early adopter then you can pre-order the book Katie and I have written about 9others: ‘Find your 9others’.
The book is full of stories from the first 10 years of 9others including anecdotes ‘from the dinner table’, the 10 key questions you need to ask yourself as you startup and scale up, and why you should go on your own journey to find your 9others.
The link to pre-order it is here or you can scan the QR code below (make sure you tell me if you buy a copy and I’ll send you a 9others bookmark and some stickers!):
Important: None of these posts are investment advice. If you are thinking about investing you should seek the advice of a suitably qualified independent advisor.
#CapitalAtRisk
Among the best news and resources I saw and shared with my portfolio over the weekend were the All-in podcast episode 119, Coadec on Twitter and Odin’s Slack channel.