Key Considerations for Founders from the SVB Collapse

It's been a very tumultuous week for the markets, and we have been monitoring the changes in the US banking system with great care. As many analysts have discussed: two things will matter in the coming days and weeks:

1. whether the actions of the authorities are successful in maintaining/restoring the confidence of depositors and investors in the US banking system.

2. whether there are any other institutions with similar vulnerabilities to SVB (or Signature Bank) lurking in the shadows either in the US or in other economies.

“...this is still a reminder of the dangers when we become too dependent on a single point of failure... the ecosystem shouldn’t be beholden to just one bank.” - Darren Eng, VC Adviser & ED of LA's venture association.

Rest assured, DealMaker is not exposed to any risk at this time; none of our operations or payment rails rely on SVB. With everything changing minute to minute, here few key takeaways we have learned in working closely with our Issuers/Founders and what strategies they'll be considering in the days to come:

Consider Your Runway ‍

Founders and CFOs need to be honest with themselves about short and long-term liquidity needs. It's no longer a concern about if you can make payroll (thankfully). But the hard questions remain: do you have enough in the bank to fund the growth you planned for the next quarter? If not, you should seriously consider what's best for your financing - debt or equity. We're here to help you lengthen your runway and can get a raise up and running in days.

Diversify Your Holdings

Relying on five people to consistently write checks may not be the best 'insurance' you need in a very tough market - like now. Consider not only where your runway money is stored but the community you are reliant on for that money. Talk to your CFO and consider diversifying the cash positions you have.

Communicate with your investors

‍Now is definitely not the time to go dark. Whether your position is good or bad; your investors need to know. In a communication vacuum, they may jump to negative conclusions and this may prevent a re-investment. It's likely better to over-communicate now, versus the opposite.

Add a Stable Asset Class

Lots of founders and VCs alike don't see Equity Crowdfunding as an attractive solution. But consider this: retail investors are often less price sensitive and won't compete for preference. Smart venture-backed companies have significant untapped potential to raise from the crowd. Your community of fans, followers, and customers is one of the most stable asset classes - think about shoring up your cash position to meet your needs for additional financing.

As we always do, we recommend you talk to counsel and your board about mapping your way forward. We have licensed broker-dealers ready to take a call, should you have any immediate questions.

‍