April Newsletter

Silicon Valley Bank, Born Again?

After catastrophic mismanagement and utter negligence left Silicon Valley Bank insolvent earlier this month, the FDIC subsequently shut down SVB and seized all assets. Thousands of depositors, employees, and investors all felt the impact of its collapse, wondering what would happen next. Long story short — First Citizens Bank just purchased all SVB's physical assets and portion of its debt at a discounted rate from the FDIC. Another bank crisis, another bailout.

But, what happened to cause another bailout?

After investigating, there are key factors that heavily contributed to the collapse. We have learned that only 3% of depositors at SVB fell under the $250,000 limit for FDIC insurance. The industry standard is around 50%. This deviation could be attributed to its niche lending space within the tech startup sector where lending amounts tend to be high, but 3% is still incredibly low. On top of that, executive leadership heavily invested in uninsured long-term U.S. Treasury Bonds, which usually an extremely safe investment. However, in this economic climate, it is very risky to sell bond positions with rising interest rates because when interest rates rise, bond yields drop. To combat that risk, it is customary to hedge the position you have taken in the market. Despite this trading standard, SVB did not hedge their position. In fact, they removed their previously held hedges to boost the bank’s profits and stock price. At the same time this was done, rising interest rates severely impacted investments in the tech sector, their primary lending focus. Lack of cash injection forced startups to withdraw their deposits from SVB to cover their own costs. For SVB to stay liquid enough for withdrawals, they were forced to sell their Treasury bonds, amassing large losses upon sale due to very high interest rates. Still not being liquid enough to keep up with deposit withdrawals, SVB sought to raise capital amongst its investors. Key investors saw this as a very bad sign and began to withdraw funds, encouraging start-ups at SVB to do the same. Subsequently, this led to the bank becoming insolvent and defunct after a $42 billion bank run on March the 9th. A day later, the FDIC stepped in.

Silicon Valley Bank’s collapse sent ripples throughout the financial sector, seeding doubt in the lending industry. Banks in New York and Switzerland who have experienced scandals in the past also felt the tremors from SVB.

Signature Bank in NY was shut down and seized by the FDIC as well. On March 19th, New York Community Bancorp acquired $38 billion of Signature’s assets and $13 billion of debt, purchased at a discount of $2.7 billion from the FDIC. Although, about $60 billion of Signature’s liability were not included in the purchase and will still cost the FDIC’s deposit insurance fund about $2.5 billion. President Biden assured the disgruntled public that the fund would be comprised of money collected from corporations and not taxpayers.

Similarly, Credit Suisse was facing insolvency. Before that could happen, it acquired by Switzerland’s biggest bank, UBS. Credit Suisse had a history of scandals and mismanagement, leading to investors quickly lose faith. The Swiss National Bank hastily brokered the acquisition to avoid further doubt in the industry, ultimately pushing UBS to buy it’s beleaguered national rival.

First Citizens BancShares to Acquire Silicon Valley Bank

It was just announced that SVB will be acquired by First Citizens BancShares, which is the 30th largest bank in the country and has been in business since 1898. U.S. regulators declared that all previous depositors at SVB will be made whole, regardless of the insurance limit set at $250,000. Similarly, in 2008, Washington Mutual (WaMu) collapsed and it was acquired by J.P. Morgan Chase. All depositors were made whole, regardless of insurance limits. Some lawmakers have recently spoken about increasing or even eliminating the insurance limit altogether. Although, no action has been taken.

Turbulent times in the lending industry have forced regulators and policy makers around the world to respond accordingly. The Federal Reserve, Bank of Canada, Bank of England, European Central Bank, and Bank of Japan have all said they would increase availability for U.S. Dollar financing.?Additionally, the Federal Reserve just implemented an emergency lending program to provide additional support to banks.

What's Your 'Why'?

by Kate Donato , Managing Partner at Hire Point Recruiting

After many years of partnering with people from all walks of life, you quickly realize how important it is to know your “Why?”?This piece of advice not only comes into play for your career, but personal life as well!?The beautiful thing about your “Why” is there is no wrong or right answer, and it will evolve over the years.

For example, I recently partnered with a candidate who was ready to transition out of her current role.?She was burnt out from working 70–80-hour work weeks.?Her why at the time was- Kate I need a role with a better quality of life, I need to be there for my kids.

?We then started the interview process with varying Director level roles.?After successfully completing the interview process, she received multiple offers.?

?Opportunity 1- Less money, but guaranteed quality of life

Opportunity 2- More money but guaranteed more hours.

?As we continued through our discussions, her initial reaction was to follow the money.?A lot of times, people lose sight of their “Why” and go right back to the money.?This tends to be where you see the vicious cycle of looking for a new role every few years because the money didn’t solve the initial problem of the “Why?”

?Ultimately, she decided to choose opportunity 1 as we went back to the initial question—“Why did I initially start this search?”

?My advice- Understand your why and go back to it during decision making time.

Patrick Farley, SVP, Corporate Controller at Yext

Patrick Farley is currently the SVP, Corporate Controller at Yext, a publicly traded technology company that helps organizations answer every question about their business. Yext's Answers Platform collects and?organizes content into a ‘Knowledge Graph’, then leverages a complementary set of products to deliver a modern search experience on a businesses or organization’s own website, as well as across over 200 service and application providers. Patrick is certainly well respected in the Accounting & Finance space as he has an extensive background with companies like PwC, Benjamin Moore, Tiffany & Co., and Wyndham Hotels & Resorts.

We at Hire Point Recruiting were given the opportunity to gain Patrick's perspective on current trends within the tech sector, Yext, and career advice. While working for these organizations, Pat supported their accounting function. He later made a switch back into Audit at Benjamin Moore and was then recruited to join Yext, charged with building out the audit function. He successfully built out the team and was recently promoted to SVP, Corporate Controller.

How are you enjoying your time in the new role as SVP, Corporate Controller?

“It’s been great. I think anytime you make a change, it's challenging and there are new things to learn. I think the biggest thing for me is Yext has always been an environment where I could continue learning.?I have always been given the autonomy to influence things and try to make changes that I thought would have a positive impact on the organization, so this opportunity to have a bigger impact on the organization, add value and continue to learn attracted me to the role.?Now that I’m in the role, every day is a new challenge and opportunity to learn and that is something I really enjoy.

Also, the team is fantastic.?I think back to seven years ago when I joined and there wasn’t the people, processes, and systems in place that we have today, I don't know that I could do this job.?In my prior role, I had the benefit of building a great team.?Luckily in the new role I’ve inherited an equally fantastic team of talented finance professionals.?The support system has kind of been instrumental for me getting up to speed and setting the foundation for a successful future.?My job is to continue to develop the team and keep them learning and engaged.”.

?How has it been transitioning from audit to accounting?

?“I did a little bit of both, right. I started my career in audit at PwC, then left and went into industry accounting and it's funny, I remember leaving audit and thinking I never want to do that again.

Then in the accounting world with book close and operational cycles, your life revolves around quarters, year-end, and things like that. I remember leaving accounting and saying, I'm not sure I want to do accounting forever. And you know, both of those things, kind of circled back around, first when I went back to audit at Benjamin Moore and Yext and then again in my current role...Clearly, I’m not very good at predicting my career journey but there is a lesson in here about being open to opportunities and that roles at different levels of seniority have very different appeals and require different skills.

I used to think a Controller was like an accounting wizard that knew everything about accounting, and I feel like one of the things I like about the role is that it is less accounting and more focused on critical thinking, analysis, and providing business insights.?This is where I think the industry is ultimately going.??It's going to be less about technical skills and preparation work and more about problem solving and analysis.?Honestly, what I've been trying to get my team to focus on is thinking about who is our customer and how do we make that partnership better. It's about thinking about what analysis, process improvements, or problem solving is going to provide better insights for our CFO, and our board and our investment community. And I think people that are going to differentiate themselves are not the technical accounting wizards. They're the ones who can simplify accounting concepts and speak in plain words and find the insights in the data and help bring those stories to life. Building these analytical muscles again will take some time but I think we are on the right track.

The one area that I think is universal across roles is team engagement.?We have a wonderful group of talented finance professionals.?My job as their leader is to create awareness of their contributions and how that work contributes to the Company and finance team strategies, and continue to challenge, develop and engage the team.?These skills are transferrable in any role and will remain a critical part of finance leaders in the future.??

How is Yext different from other organizations you have worked throughout your career??What advice would you give someone interested in getting into the startup space?

“Well, Yext isn’t much of a startup anymore.?We are about 6 years post IPO and while the culture still has some of the startup values, we’ve come a really long way in maturity and stability.?I've always considered myself to be a bit of a builder and a curious thinker.?One of the things that has helped me throughout my career is I have sat in different seats providing different prospectives. I’ve always been curious and asked lots of questions, which has allowed me to build an appreciation and understanding of how the operations of a business resulted in the numbers you see in the financial statements.

?When I joined Yext, we had very little in terms of systems, process, and roles & responsibilities, which was very different from the more established, mature companies that I worked for previously. So much needed to be created so I was able to directly influence how we do things across the board, in order to cash, procure to pay, and the financial reporting process.?We kind of had to build that stuff which is not for the faint of heart. I look back now and realize we didn’t always make the right decisions but we’ve also made some really amazing progress and to be able to reflect on what we’ve built over the years and recognize the result is a very rewarding feeling.?I joke that Yext is like my fourth child.?I've invested so much time, you know, in this function. It’s not for everyone, but if you're a builder or someone that wants to challenge the way of doing things, an early stage or pre-IPO Company is a great place to be.?It would be hard to find this type of autonomy in an accounting or finance role in a more established company and its not for everyone, especially if you prefer more structure and stability. ”

?What do you look for when interviewing candidates?

?“Interviewing is one of my favorite parts of the job. I don't know I've lost count, but I've probably done hundreds of interviews during my tenure at Yext.?In the beginning of interviews, I tell candidates that I don’t want to hear about concepts, I want to talk about examples. Anyone who has some experience can hit the buzzwords, they can talk conceptually about what the company does or what an auditor does or some transaction that occurred.

What I want to hear from people is the specifics and I really think that depth is a differentiator. If someone can demonstrate that they have a good command on something, can talk about the obstacles and approach that they took, or some person that they had to influence, that really stands out.

The benefit is you can quickly sort out the people who are pretending that they had some experience, I'm always challenging candidates to tell me more. I want to hear more details, like specific interactions that you have had.?So that's kind of a big one for me. I'm big on examples. I don't like concepts and I quickly try to get people to back examples with in-depth answers.

?Attitude is also huge for me.?The thing that differentiates high potential and performing candidates is attitude, like someone who's receptive to feedback, responds positively in adverse situations, demonstrates a willingness to learn and be curious and contribute as part of a team.??They tend to be more of a giver, not a taker, you know, sort of thing. I think that creates kind of the right kind of environment and strong culture.

?The last thing I look at is grit and persistence.?For example, tell me about the thing you worked really hard at, tell me the thing that you still work at that you're still not very good at, you know, there's lots of questions around grit and persistence. I think this is especially important in an environment like Yext that’s fast moving and sometimes challenging to get things done. The gritty persistent people tend to do well here.

What are your thoughts on Silicon Valley and Signature Bank??Do you think this is going to a have a domino impact on the tech industry?

?“I think it was eye opening for people during that time when their deposits may not have been secured.??Luckily, the Fed stepped in and said they were going to backstop that. I think if that hadn’t happened, there would be a significant risk of a ripple effect. When companies don’t have the cash to meet payrolls and pay their vendors, something like that could certainly have a ripple effect through the industry. Luckily, we didn't get there, but I don't think we're out of the woods yet. I think that there continues to be liquidity challenges with deposits decreasing and rates increasing.

I think that as deposits continue to move out of these kind of mid-tier regional banks, I think you're going to continue to see stress on the system.?You might even see these mid-tier banks needing additional liquidity to keep them afloat.

?And it's been challenging for the Treasury function because money market overnight investments were a safe investment, but now Treasury functions are being challenged to think about, where's my money? Am I diversified? Is there a kind of disproportionate risk in the financial institutions that I'm using?

I think the bigger issue is just the continued volatility and uncertainty in markets.?I don't think there's existential risk, but companies are just more reluctant to invest during times of uncertainty. I do think it's going to continue to be challenging, especially for companies that are not generating cash, as there is just less capital available in the market. One of the big emphases for Yext has been to try to increase efficiency and get back to a position of generating cash.?Companies with strong balance sheets are going to be much more resilient during these challenging macroeconomic conditions.?I think the investors and VCs are even kind of demanding that companies operate a little more fiscally responsible.

The tech sector has been hard with layoffs.?What are your thoughts on everything that is going on??Light at the end of the tunnel?

“Yeah, I think there was probably a combination of things.?I think prior to 2022, there was a lot of cheap money, a lot of capital flowing into the system, the mantra in tech was growth at all costs. There was little to no discussion about fundamental financial performance like profitability, cash generation and there was not much consequence for over hiring to support that growth, even if the growth was inefficient.?Now, that environment has changed.?Obviously, capital is dried up a little bit.?And I think there's just more demand on companies for profitability and fiscal responsibility and I think a lot of companies are looking at their spending, run rates and cash burn and they are saying, this is not sustainable, especially in this environment.?And so the adjustment you see is companies who have looked at that their financial results now and saying hey we can be a lot more efficient and maybe we didn’t need all those people we hired in the last few years, and that is the reductions we are seeing play out now.?I've seen charts that show a lot of the jobs that have been eliminated are only a small portion of the hiring that was done by those same firms and the last 5 years.?So, I think it's a little bit the company's got ahead of their skis and they're kind of right sizing now.

I don’t think software or technology is broken in any fundamental way.?In fact, I think it’s the opposite. I think anything that will make your employees more productive is going to be ultimately successful. And I think a lot of that innovation comes from technology. I don't see this as a kind of macro risk, companies are just right sizing and kind of shoring up their operations. But I still think tech is going to be a great growth driver for the economy going forward.?

?What is the best piece of advice you could give someone starting out in their career?

?“First, I would say, you don’t always think of your career trajectory as kind of like a ladder, you know, like, it's not point A to point B straight up. I think a lot of the things that have helped me have come from saying yes to different opportunities.?Whether it was, a unique client when I was in public accounting or some unique experience.??For example, when I was at Benjamin Moore, I was building the audit function and getting the foundation there but at the same time, they were doing a big SAP implementation and needed help with record to report. I said, I'll help, I'll jump in. I'll take over. Well, it started out as helping and it turned into fully leading record to report but the idea of just like saying yes to the opportunities that are in front of it, even if you don't always see it as like a direct progression into the role that you want is something that has served me well and given me a lot of the foundations that help me contribute in sometimes unique ways in my current role.?I know the big picture, how governance, operations, systems, and people all come together to achieve an objective and produce an optimal result and that diverse experience can’t be built in vertical progression in just an accounting role.

The other thing I would tell you is surround yourself with great people. I have had great coworkers, mentors, managers and learned so much, both technical and interpersonal skills, through working for smart, kind people.?’The team that I work with are super talented, hard workers, but also kind, thoughtful and want to make others around them better.?I was lucky to learn early on from a few mentors at PwC that you’re only going to go as far as the people you put around you, the team you build. Focus on hiring the right people, retaining the right people, treating people with respect, trying to build rapport with people and just surrounding yourself with the kind of people that you want to work for and the kind of professional you want to be.?In a leadership role, I also think that how you treat people will directly affect how engaged they are and how much effort they put forth I've been fortunate that Yext values kindness, respect, hard work and persistence and my career experiences and the people I’ve learned from along the way have prepared me well for this culture.

Hire Point Recruiting Updates

Hire Point is excited to announce our new addition to our team Camille Araeno!?Camille is joining Hire Point as an Intern; she is currently in the process of pursuing her degree in Business Management from Seton Hall University (Go Pirates!).?She discovered her passion for recruiting while working for AMC Theatres where she partnered with Human Resources to screen, interview, and onboard candidates. While pursuing her degree full time she had the opportunity to work for organizations such as Chick-fil-A and Starbucks, these experiences strengthened her communication skills and ability to work in a fast-paced environment.

Fun fact about Camille, she is currently a newscaster for Seton Hall’s Pirate Radio WSOU (Tune into 89.5). During her free time, she likes to spend time with family and friends and go to concerts or sporting events.

Leadership

Managing Partner - Kate Donato

Managing Partner - Anthony Carrea