Venture Capitalist at Theory

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2 minute read / Mar 12, 2023 /

Take a Breath

Within the span of a few days, Startupland has experience an extraordinary set of events. The collapse of Silicon Valley Bank & 2 two others, then the intervention of the US Treasury to backstop deposits.

During that time, founders & management teams responded with tremendous fortitude under pressure, developing contingency plans to assure the success of their businesses - yet again!

It was an inspirational moment - and a challenging one.

Take a breath.

As business as usual resumes, many companies are working through a task list similar to this one :

  1. Communicating the health of the business & the plan to employees.
  2. Meeting payroll obligations for March’s first & second payroll cycles by accessing the capital tied up in accounts.
  3. Establishing new banking relationships with several banking providers & re-evaluating cash-management policies to ensure adequate liquidity.
  4. Understanding the second order effects which will likely increase the costs of doing business
    • Venture debt : In the last few quarters, many companies signed term sheet for venture debt lines as runway extension policies. Startups may need to negotiate new lines elsewhere. However, the venture debt market may shrink in size & rates may increase because Silicon Valley Bank (SVB).
    • Redundancy in payment processing : payroll providers & billing systems will establish relationships with multiple payment providers to eliminate the dependency risk on a single vendor possibly increasing fees.
    • Sales cycles lengthen temporarily : during the last few days and for the next week, management teams have been scrambling to respond to a cash-liquidity crisis, which has stalled financial approvals of new projects & purchases.

Other second-order effects will arise, but they are hard to predict. Teams will need to remain agile to respond to them.

Read More:

2023 Go-to-Market Survey - Understanding How Startups Have Shifted in 2023