Financial Volatility: Lessons from the Past

I feel too old to be surprised, but the speed of the SVB failure surprised me. Wow… two days! This doesn’t seem systemic, but it sure is important to tech. Here is what I learned in 2008 when the global financial crisis hit; a few things that may be relevant today:

Financing is an ecosystem, so you need a network.

For a few weeks, talk to everyone … all the time. In the fall of ’08, I spoke every day with Ruth Porat (then at Morgan Stanley), David Solomon and John Weinberg (Goldman Sachs), and Jimmy Lee (JP Morgan). I spoke with Tim Geithner frequently. In a crisis, networks matter and the government matters most. Last weekend they got it right by moving quickly to back up SVB. But they are not finished. There is time to debate moral hazard and who caused this; first save the system.

Work on scenarios, not plans.?

Learn to work day to day and week to week. Stamina is important. You must be aware of everything, all the time. The impact of SVB will be felt for months and years.?

Cash is more important than valuation.

A lot of assets are illiquid. The interests of lenders and investors have broadly diverged. If you have cash ... congratulations! You should be making “generational investments.” If not, whatever you are doing is worth much, much less. Be willing to sacrifice valuation for balance sheet strength and live to play another day.?

Find your problem solvers, not finger pointers.

You will make dozens of decisions over the next 30 days with little information. You don’t have time for bitching about the small things. Get the big points right. Boards and management need to be accountable for solutions. This is a pass/fail test, progress versus perfection.?

Hold two truths.

Things can always get worse. But the actions you take, the relationships you build, and investments you make in tough cycles will pay off significantly through the cycle.

Over time it’s worth understanding how the “tech partner bank” failed in 48 hours. In 2008, many lenders took too much risk and the regulatory structure failed. But, it took Lehman Brothers 15 months to fail with two private attempts to save it.?Two days.?This can only happen when the ecosystem turns on a bank and no one helps.?

Tech is great and innovative. Venture requires an ecosystem for success. But people throw around words like “partner” and “relationship” too frequently. Trust is built on the worst day. Look in the mirror … there aren’t enough real partners in tech.

There will be better days ahead. Work on scenarios…make decisions without fear… get cash… hold two truths. Know that the global economy benefits from a vibrant venture sector.