I know this may come across as flippant, but I can easily say that the past couple of weeks have presented the most surreal turn of events in my working career. My memory of the 2008 global financial crisis is mostly blurry, but consists of meandering queues outside of Northern Rock high street branches (I only remember this as they were a former sponsor of Newcastle United) and scenes from the numerous times I’ve watched The Big Short and Steve Carell lambasting obnoxious bankers. Bank failures are more common than I expected; but the four days between March 9th – 12th was my first experience of how, once the financial markets smell fear, they will chew you up and spit you out.
Admittedly, that Thursday morning was business as usual. We were all aware of the headlines and kept our eyes peeled for any updates, but as the news began to permeate, all of our inboxes began to light up! Enquiries were coming from everywhere – our website, community channels, introductions from venture capital investors, referrals from existing clients, you name it. It became abundantly clear that companies were taking stock of what was happening and more importantly, what the worst case scenario was if they didn’t act to protect their cash. To many, the idea that SVB really could fail seemed so far-fetched, but as the market caught wind of the reality of the situation (via tweeting, slacking and linkedIn-ing..), the somewhat unlikely became the probable.
Friday afternoon was a particularly surreal stretch of hours! Sitting on zoom calls with companies who were simultaneously being locked out of their banking portal, trying to figure out if they were going to rescue even a slice of their funds, let alone their entire deposit. On multiple occasions, calls were pushed back to the following week so that they could dedicate their time to retrieving whatever they could in case SVB did collapse; and what was looking probable, was becoming inevitable.
Within 4 days, we had a surge of inbound enquiries and made sure that the conversations helped individuals understand what their options were, even if it meant pointing them to another provider. For many founders and CEOs, it was a weekend of uncharted levels of stress and minimal (if not zero) sleep. But when the news dropped that HSBC would purchase SVB UK and the FDIC had insured all deposits for its parent company in the US, the market had reached a moment of serenity. It goes without saying that the correct decision was reached to ensure all SVB clients were made whole, otherwise many businesses that we take for granted, who are creating life-changing products or services, destined to change the world for the better, may no longer be with us!
The days and weeks following the news of SVB’s collapse and subsequent rescue revealed a tectonic shift in mindset. When you receive and immediately use your get out of jail free card, you will do whatever you can to try and prevent yourself from ever sitting on the wrong side of the courtroom, especially when you consider that this type of rescue mission may not happen if the situation comes around again. Whilst I don’t have the exact numbers to hand just yet, what I do know is that our platform experienced a significant increase in subscriptions into our government, SSA and secured FTFs; once again, the old adage security, liquidity, yield came to the forefront as the need to diversify became the number one priority. Despite interest rates sitting at the highest levels in over 15 years, the preservation of capital is the most important factor when you are deciding where to allocate your liquidity; and yield is just a treat.