Founding Business Development Representative

The biggest U.S. bank failure since 2008 has emphasized the fundamental importance of best practices. That’s what a dozen top finance leaders across industries told PYMNTS during a series of interviews that took place in the weeks following the aftermath of the Silicon Valley Bank (SVB)-led banking failures in March. While the immediate market impact is starting to ease up, the collapses have highlighted the need for greater and more frequent communication led by chief financial officers around liquidity levels and cash availability at the board, management and even employee levels. They have also brought bank risk frameworks, working capital management strategies, and relationship redundancy tactics into clearer focus

Silicon Valley Bank was a full-service institution focused on meeting the needs of startups.Few other banks offered the potent mix of flexibility, understanding and banking products and services that made the now-failed SVB such a fixture within the startup landscape.“SVB is an incredible bank,” Ori Franco, chief financial officer at Density, told PYMNTS in a discussion that touched on the fallout from the lender’s collapse.“We stand behind them as they stood behind us when we needed it as a company,” he added, emphasizing that Density maintains its banking relationship with SVB.SVB was acquired Monday (March 27) in part by First Citizens Bank, a North Carolina lender with a long history of purchasing failed banks.Banks Must Find Their Product-Market FitGiven that the government stepped in to backstop SVB deposits, Franco said that the SVB failure caused “more of an operational challenge, than a capital at risk challenge,” adding that his organization was able to quickly open another account with a regional bank to manage its vendor payments and handle other immediate needs, including payroll.Still, with SVB gone, a lot of young companies will find it harder to manage their finances, and many startups find themselves facing pressing existential questions around their future.“SVB offered a suite of products to support companies our size, particularly credit facilities that require deposits to be in the bank in exchange for offering credit [to startups],” Franco said. “For example, if a [startup] raises a round, SVB would provide them with a working capital facility in exchange for that funding to be held with them. Other banks offer [these products], but SVB was just so far ahead.”In general, banks lend to companies that can provide proof of revenue and are able to meet other longstanding criteria. By contrast, SVB supported many startups at the beginning of their operational journeys and was more lenient in allowing variations within contractual terms, including revenue covenants underwriting credit agreements.Franco said that, looking forward, he believes other banks will start to take a similarly understanding view in establishing new banking relationships with startups.“I think there will be more leniency around requirements to hold deposits in a given financial institution to the extent that you have credit facilities outstanding,” he said. “It will become more of a point of negotiation than it was in the past.”He added that from a credit product standpoint, “it’s good business.”Reducing Redundancies to Drive GrowthFranco said what stands out to him about the post-crisis banking landscape, from his perspective atop the finance arm of a mature and well-funded startup, is it is imperative to address relationship redundancy questions and avoid the same type of concentration risk that brought SVB down.“It’s easy just to hold money in a bank,” he said. “What’s the hard part is how to operationalize treasury management

Density CFO Ori Franco says firms need data and insights that can be provided by digital tools to make decisions about reallocating office space.