Good morning,
What was your reaction on March 10, 2023, when you first heard about Silicon Valley Bank’s collapse?
During a panel session on SVB’s fall at Fortune’s Most Powerful Women Next Gen Summit in San Diego yesterday, founders and a finance chief shared some eye-opening accounts.
“We had all of our funds with SVB, and as a woman of color [running the brand], I definitely felt, who’s going to have our back during this?” said Vanessa Pham, cofounder and CEO of Omsom, a direct-to-customer food brand. “How am I going to make payroll on Monday was the biggest priority,” Pham said. “The first thing we did was talk to our investors and get their perspective.”
“I’m telling my LPs, technically, unless BNY Mellon goes down, we’re fine,” said Sarah Kunst, cofounder and general partner at Cleo Capital. “Meanwhile, I’m like laying on my kitchen floor, thinking the world is over.”
Dayna Quanbeck, Rothy’s CFO and COO, also shared her experience. “I had diversified cash parked at SVB,” Quanbeck said. “And that was a heartbreaking moment because you think you’re doing the right thing by diversifying and parking cash to keep it safe.”
Rothy’s is a San Francisco-based, sustainable national shoe brand, which transforms discarded plastic water bottles into fashionable footwear. Celebrities like Katie Holmes and Meghan Markle have worn the brand. The company announced a $1 billion valuation in December 2021.
Quanbeck said she was at her daughter’s preschool with “lots of other venture people,” when she first heard the news of SVB’s fall. “My experience is a little different from Vanessa’s in that I didn’t have to worry about payroll,” she said. “But thinking that nest egg was at risk, was disheartening.”
‘I picked the wrong safe banks’
In the wake of SVB’s collapse, CFOs, even those at companies not directly impacted, began facing difficult questions from their boards, Russ Porter, CFO of the Institute of Management Accountants, recently told me.
Quanbeck shared her perspective during the panel discussion. “We had done a $200 million primary round last year,” she said. “I think I’m in a little bit of a different situation from somebody that’s very early stage and maybe had, you know, six months of runway. For us, it was being patient knowing you had done the right thing, you had done nothing wrong. [I had] multiple calls with my board, accounts were frozen, and you couldn’t move it. The irony is that we also had safe cash parked at First Republic. So, what you should take away is that I picked the wrong safe banks. But we had our concentration account at JPMorgan.”
She continued, “I think that Friday and Saturday, there was so much anxiety because nobody knew if this was done. Are we getting it back? We’ve worked so hard to raise the round, to lose it this way. I was like, at least let me blow it on something else. This is not the way you want to lose money.”
“I think in Silicon Valley, or at least in San Francisco, people waited it out until we got the news on Sunday night,” she said. “There was nothing else really you could do.”
Quanbeck joined Rothy’s as finance chief in April 2019. She took on the additional role as COO in November. Before Rothy’s, she served in roles at Charlotte Russe including VP of finance, CFO, and interim CEO. Quanbeck also spent about seven years at Merrill Lynch.
There is one person on her company’s board that is her “go-to gut check,” Quanbeck said. “At the time, [he] happened to be in Singapore,” she said. “I called him probably 10 times.”
It’s important to make sure you have a point person whom you can be transparent with to work things out, Quanbeck said. “Because sometimes there’s not a clear answer, and you’ve got to pro-con-pro your path forward,” she said.
Sheryl Estrada
sheryl.estrada@fortune.com
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Big deal
From Jan. 1 to May 14, private equity and venture capital firms announced $10.34 billion of investments across 342 transactions in the A.I. and machine learning sector worldwide, according to new S&P Global Market Intelligence data. This is showing signs of recovery in 2023 after global private equity deal values in A.I. and machine learning companies slumped to "the lowest levels in the fourth quarter of 2022 since at least 2020," the research found.
Going deeper
"How Midsize Companies Can Repair Damaged Customer Relationships," a new report in Harvard Business Review, offers solutions for the tension between cost efficiency and customer intimacy, which upper-middle-market companies need to understand if they have ambitions to rise to the top of their industry. This is particularly important as the authors, Jason McDannold, managing director, and Saurabh Singh, director, at AlixPartners in the Private Equity practice, found that the last few years of disruption have resulted in an "upsurge in customer rage."
Companies are often experiencing a tradeoff in lost customer intimacy as they pursue more digital solutions, and customer rage is increasing, according to the report. The authors examine how companies are failing their customers and how to reverse the course. The report also explains why midsize companies need to continually explore their options for A.I. and machine learning, transforming from "laggards" to "leaders."
Leaderboard
Elizabeth "Beth" Eby was named CFO at SunPower Corp. (Nasdaq: SPWR), a solar technology and energy services company, effective May 30. Eby brings more than 30 years of experience in financial strategy. She most recently served as CFO of NeoPhotonics Corporation, a provider of high-speed digital optics. Before that, Eby grew her career at Intel Corporation, where she held several senior roles during her more than 25-year tenure, including VP of finance and Group CFO for the Internet of Things business.
William G. Monroe IV was named CFO at Community Healthcare Trust Incorporated (NYSE: CHCT), effective June 1. Monroe has served as managing director of the Healthcare Investment Banking Group at Truist Securities, Inc. in Atlanta. He joined Truist Securities, Inc. as a VP in 2011 via its predecessor firm SunTrust Robinson Humphrey, Inc. Monroe was previously VP of private equity Placement at Fortress Group, Inc. He began his investment banking career at J.P. Morgan Securities LLC in New York, where he was an associate in the Syndicated & Leveraged Finance Group.
Overheard
"Failure to resolve the current impasse could easily have more negative consequences. Although the American economy is generally strong, high inflation has created stresses in our financial system, including several recent bank failures. Much worse will occur if the nation defaults on our debt obligations, which would weaken our position in the world financial system."
—A group of more than 140 CEOs and Wall Street titans—including Pfizer CEO Albert Bourla, Macy’s CEO Jeff Gennette, Morgan Stanley CEO James Gorman, Nasdaq CEO Adena Friedman, Goldman Sachs CEO David Solomon—wrote in an open letter to President Joe Biden and Congress on Tuesday, calling for action to end the pending debt crisis, Fortune reported.
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