Updated: Sep 12
The focus of our annual member meeting this year is Retrofitting for Growth. It is a high-impact agenda driven by this incredible group of banks that are future forward. We needed to change venues to accommodate the demand from members to participate in the discussion
We decided on that theme nearly a month ago now, built on our view that modernizing the technology infrastructure was necessary, but insufficient, for driving growth. We also wanted to emphasize the need for banks to move not only their technology, but also their people and processes, and major parts of their entire strategy from fragility to agility.
Little did we know just how urgent the need to make these changes would prove to be.
Well, That Escalated Quickly
I was shifting my attention late on Wednesday night March 8th to our upcoming Fintech House at SXSW when I saw a tweet about Silicon Valley Bank. It included details of their $2b write down on a $20b sale of bonds and proposal to raise equity. It was odd timing, and it didn't sit well. My wife asked why I was up at 3AM pacing about a bank. The writing was on the wall: neither mathematically necessary nor rational, but there was about to be a run on SVB. Thursday mid-day the Alloy Labs Alchemist Fund moved sufficient capital to support existing portfolio companies and our next two investments out of SVB to a separate account. Less than 18 hours later, SVB would become the second largest bank failure in U.S. history. Let’s just say it was an interesting weekend to be hosting thought leaders from banks, venture firms, and startups at Fintech House in Austin. Stress eating tacos and BBQ ensued. We quickly scheduled an all-member virtual Town Hall for the next week as everyone was digesting the 24/7 news cycle (and some of us were still digesting Franklin's BBQ).
Some observations and calls to actions from our discussions: As a West Pointer, I'm fond of Prussian military strategist Helmuth von Moltke's quote "No battle plan survives contact with the enemy." JP prefers the esteemed philosopher Mike Tyson: "Everybody has a plan until they get punched in the face." Silicon Valley Bank got punched in the face. The same could be said of our industry by the global financial crisis in 2008, then again by a global pandemic in 2020, and yet again by the disjointed rollout of the PPP program. The key takeaway: we may crave certainty, but the future is uncertain.
Action > Talk
In the face of uncertainty, action means more than words. This was apparent at Fintech House and in the Town Hall. It wasn't idle observation but active problem solving. Leaders like Jill Castilla and Julie Thurlow took to social media to educate and reassure the jittery Twittery public. Members sprang into action on what could be done. The intersection of VCs, startups, and banks at SXSW led to a product opportunity that benefited the entire ecosystem. While the SVB bailout over the weekend ultimately meant it wasn't needed, in less than 48 hours we had close to $50M ready to be deployed in emergency payroll loans to growth stage startups. This shows what an action-oriented team that is tightly connected outside of the banking ecosystem can accomplish. The member Town Hall was also a vibrant discussion, and the feedback of its utility surprised our team. It probably shouldn't have been a surprise given how impactful the interactions around PPP were in a moment of crisis. Samer made an interesting observation: "the ability to quickly respond in the moment isn't the primary goal, but it is a powerful byproduct of working so closely together." One of the other action items from the Town Hall was the exploration of a share deposit network. Meetings with key vendors such as Intrafi and Stonecastle were quickly scheduled. Whether an existing solution solves our needs or we need to partner or build something new, we will ensure that we can support each other in times of need. The need to create stickiness in our customer relationships has been long recognized by our members, and we’ll continue to double down on unique partnerships like Carefull and The Postage that secure and expand customer relationships not based on rates. This isn't a shill, but I am looking forward to the thought leadership that will gather in Nashville for the member meeting. When I first got into venture capital, we were backed by leading hedge funds. Then the internet bubble burst. One of our lead investors enthusiastically told us "Turmoil creates opportunity and it will be owned by those who have courage and are willing to write a check." The future is uncertain, but it is bright.