Name: Silicon Valley Bank CEO's advice for startups during COVID-19 crisis
Uploaded: 2020-04-13
Duration: 7 min 48 s
Description: Greg Becker says 'people are going to remember how you operated.'

[MUSIC PLAYING] SUSIE GHARIB: Greg, thank you so much for joining us to talk about coronavirus, and its impact on Silicon Valley company. These are tough times for all kinds of companies, big and small, but I imagine especially challenging for the startup companies. How are they doing? What are you hearing? GREG BECKER: It's a broad spectrum. You have some companies, any company that's tied to the travel leisure industry, any of those things, obviously all small businesses, those are impacted the most by far. Right. And those are digital companies that were supporting those industries, so those are struggling the most. There's other companies that are actually doing OK. Some healthcare companies are actually in pretty good shape. There's some software as a service companies that are still doing pretty well. So it's pretty broad based. Some are doing well, and some are really struggling. But what we're hearing, and the feedback we're getting from our clients, is a lot of them are all about how do you preserve cash. So they're creating layoffs, and they're really slowing down any hiring, or stopping hiring. So that's the message we're getting right now. SUSIE GHARIB: Just about every company in Silicon Valley does business with your bank, the Silicon Valley bank. Tell us, Greg, what you're doing to support your client base? GREG BECKER: Right away as soon as we realized how bad the crisis was, we knew we had to react in a very aggressive way to be helpful. So we rolled out a series of programs. The one that's probably most notable a week ago was the Venture Debt Relief program. And what that did is for loans that were $10 million and below, venture debt loans, we basically gave them a six-month principal payment holiday, and took that six-month principal payments, add it to the back and the maturity. Just to give them cash flow relief in a very quick way. We've introduced a lot of other programs, but that's the most notable one. So for us it's how do we make it easy, broadly speaking, across the portfolio. That's what our philosophy has been, and that's what we are gonna continue to do for our clients. SUSIE GHARIB: Right. Well that's a huge help, and offering a lot of support to these young companies. What about support from the government? How much is the government really helping in terms of these small business loans and paycheck protection? Are these startup companies eligible, or are there restrictions? GREG BECKER: It's a great question. And the answer is a lot of them are eligible, but there are restrictions. And this especially impacts our client base. So one of the challenges with the paycheck protection program, which is the one that a lot of people are talking about, the $350 billion under the CARES Act. Think about it almost like a grant. It is there to cover and protect paychecks, payroll, and if they hit certain criteria, that debt can be forgiven by the government. So it's a great program. A lot of companies are eligible and we were, in fact, today, open for taking those applications. We're getting flooded with applicants, because it's such a big program. Right. So that's the good news. The challenge for our clients is the following. There's a rule within this SBA law called the Affiliate Rule where if you have certain requirements, or certain investors that have control over your stock, you aren't able to qualify. So you get kicked out. That's a huge issue for our client base. We've been working with the national venture capital association, and other organizations to get that changed. But as it stands right now, that hasn't changed. And it's an issue that they're dealing with. SUSIE GHARIB: That is a big issue, but I've also heard for even with the companies that are eligible for those small business loans from the government, the application process is very onerous and complicated. Are you helping your client base to make those applications? GREG BECKER: The application itself, I would assume, when you think about the fields that are being populated, that's not the complicated part. There are questions that companies have to go through to determine. Right. The payroll levels and things like that, the documentation that needs to get submitted. That's one part. The second part gets into this Affiliation Rule, or your ownership. If you have certain ownership criteria, then it's subject to interpretation. So the advice we're giving to our clients is that you really do need to sit down with your outside counsel, and walk through the questions to make sure that you're answering the questions the right way. It isn't easy, but I would say the government has tried to put together the simplest program possible. They're trying to protect against fraud, they're trying to protect against the wrong companies getting the relief. But to your point, it isn't easy. SUSIE GHARIB: I'm wondering that given all the challenges that startups are facing, like having enough cash, and dealing with layoffs, and all of that, could this be the beginning of a wave of acquisitions where the established, strong companies are buying up the newbies? What do you think? GREG BECKER: I think that could happen. I think there's gonna be mergers of companies. So similar type companies that want to get critical mass, so coming together, I think that could happen. I think larger companies, the question for them is gonna be, they're so large, is the government gonna allow them to make these acquisitions? Right. So when you look at the Google acquisition of Fitbit, and then all the attention that that got. That's gonna be a question that's gonna follow through, are these larger companies gonna be allowed to do many acquisitions? But I do expect more of peer-to-peer mergers, or medium sized technology companies looking to acquire some of these smaller ones. SUSIE GHARIB: I know over the years you've mentored a lot of the founders and CEOs of the companies in Silicon Valley. What's the most important advice you're giving them now? And how they should manage through this coronavirus crisis? GREG BECKER: Everybody is right in the heat of battle right now. And they're dealing on a day to day basis trying to figure out how to really survive at the end of the day. One thing that I give advice to our clients to and again CEOs alike is people are gonna remember you, and how you operated in this environment. They're gonna remember that. So it's about being transparent, being patient, being empathetic to people. Right. Everyone's stressed out, everyone's trying to do the right thing, and you really do have to keep your wits about you, keep a cool head, and just make sure that you're being as transparent as you possibly can be. That to me is some of the best advice that I can remember living through the 2000/2001 crisis, the '08/'09, and then even being here today. SUSIE GHARIB: You know, Greg, people look at Silicon Valley as a place for hope and optimism where smart, creative entrepreneurs come up with these innovations that impact all of our daily lives. What impact do you think that this prolonged crisis could have on America's entrepreneurial spirit? GREG BECKER: Well one of the things I see that the technology community has benefited from is how much they leverage technology in their own companies. And what I think other companies are going to benefit from is they're going to see working from home and all the other technologies that are going to need to be adopted in order for them to be more cutting edge, more nimble to face challenges like this. I think that that whole philosophy, that whole embracing of innovation is gonna permeate throughout the entire economy. And I actually think that in the end is gonna be a catalyst, and add additional fuel for growth for the innovation economy for many, many years to come. 

Greg Becker says "people are going to remember how you operated."

Silicon Valley Bank CEO's advice for startups during COVID-19 crisis

Leadership

Becker outlines how the company is assisting its customers.