A Former SVB Employee’s Thoughts on The Banking Collapse
What a crazy last week or so it has been. We have seen major banks close/acquired which has caused the most uncertain times in the startup and VC ecosystem. I want to start off by saying that I had the absolute pleasure of working at SVB for 2 years as my first job out of college. It was the best place for someone fresh out of college to start their career and learn as so many people took me under their wing to coach and train me. The people and culture were amazing and I truly could not have imagined a better place to work. I would not be where I am today without SVB and the people there. I, like many, am saddened by the news and feel for all the employees and former colleagues that are still there that I used to work with and hope for the best. I look forward to a world where we emerge from this and SVB is back in some way, shape, or form in the community doing what they do best.
I could sit here and write out and try to explain what has occurred over the past week with SVB and Signature Bank, but I feel like at this point there have been so many well written articles explaining the situation so I will link one here for better details.
The whole situation was more of a psychological issue of risk versus reward. Leaving deposits or pulling, which created a prisoners dilemma for people banking with SVB, Signature, etc. There was no risk to pull your money and in the worst case scenario you could lose it all, so everyone rushed. A classic bank run. This is nothing new and has occurred hundreds if not thousands of times since banking has been around. Tim Streit, co-founder and partner here at Grand Ventures, put together a great blog of his thoughts on the matter detailing his experience dealing with a bank failure that provides great color and understanding that we have been here before and something we will experience again one day but a reminder that we will emerge stronger from it.
We could look back and point out all the problems that led up to this and how it could be avoided, but we can’t change the past. So let’s look towards the future and where do we go from here?
It’s going to get worse before it gets better. Startups will have a much harder time raising, and many will end up winding down. VCs will be even more cautious as they wait to see how the dust settles from all these events and interest rate hikes. At Grand Ventures, we are looking at things more optimistically as we believe good companies will continue to fundraise, and as we emerge from this VCs will look to deploy capital opportunistically as valuations continue to come down. Historically in economic downturns, strong founders and companies are born as they are heads down building and doing what they do best innovating and improving upon all the issues that are heightened at the time. With lower valuations and an abundance of dry capital sitting on the sidelines, VCs will see some of the best returns come from the next couple of years and exceptionally startups being built now.
With great vintages of funds and startups emerging from the aftermath, I think this time period and the previous five years will help produce some of the best future partners and seasoned investors ten years from now for VCs. We have seen more than I would have imagined over the lifetime of a normal career packed into the past five years from a Covid pandemic and lockdown, to the subsequent boom in startup funding and VC deployment, to most recently bank failures and uncertainty in the market and banking system overall. Looking back, it has been an incredible learning opportunity navigating these markets to take the knowledge and experience learning from the partners on how to best help founders and startups grow while delivering the best returns to investors. I’m grateful to have amazing partners and colleagues here at Grand Ventures who take ownership in your career development and want to try and help coach you to become a better investor.
With all that being said, we are in uncertain times, but we have to remain optimistic. If history has taught us anything is that it repeats itself but we always emerge out stronger and better.
