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| Lisa Ann Pinkerton |
The aftermath of Silicon Valley Bank's downfall suggests that mismanaged public relations (or the absence thereof) played a significant role in it. The two factors that appear to have contributed to this failure were a newsletter read by venture capitalists that put the bank’s vulnerabilities on their radar, and a press release that was dubbed "convoluted" and "comical" by TechCrunch journalist Connie Loizos.
As SVB's significant bond position soured amid rising interest rates, the snowball effect of its failure began to gain momentum. It quickly became an avalanche on March 8, when the company announced its plan to stabilize its balance sheet. During the subsequent Zoom call, attendees were not allowed to ask questions, and SVB CEO Greg Becker's messages failed to instill confidence.
According to reports, Becker urged people to "stay calm" and emphasized that "the last thing we need you to do is panic." These are not the words and sentiments you want to hear from a bank CEO
Stalk Your Media Mentions
It’s suspected that the seed of the panic may have originated from Byrne Hobart's email newsletter, The Diff, and the associated Twitter storm. He wrote, “Silicon Valley Bank was, based on the market value of their assets, technically insolvent last quarter and is now levered 185:1.” The tweet garnered significant attention, accumulating 3.5 million views, 380 retweets and numerous quoted tweets.
Granted, it can be difficult to monitor newsletters, and had SVB put some systems in place to track these mentions, they might have provided an an early warning of concern among the startup community, allowing SVB to take additional measures to release the March 8 information with deference to how people might react emotionally.
Write for the Layman
The quality of the press release is standard Investor Relations gruel. You can read my annotated comments on the document provided in this link. It assumes that the reader is already knowledgeable about financial markets and provides no explanation for why the company is pursuing these measures.
With some careful planning, this announcement could have laid the groundwork for a message that conveyed stability and reassurance to investors and depositors. This was a crucial moment for the company to contextualize the news and address concerns about public confidence.
The initial press release is a critical moment for companies to shape the narrative and guide public perception, also known as "messaging pull-through" in the industry. It establishes the tone and framing for the information, providing a foundation that can benefit the company's image. While individuals will ultimately form their own opinions, a well-crafted release can help steer the conversation in a favorable direction.
Timing is Crucial
The timing of SVB's announcement was both unlucky and unfortunate. It's unclear whether there was a specific reason for SVB to release the news on a Wednesday afternoon, just moments before the announcement of crypto’s Silvergate Bank's liquidation. The proximity of the two announcements likely fueled speculation about the health of SVB.
If SVB had been planning the new stock offerings for a few days, they could have taken steps to strategically release the news and better control the narrative, potentially avoiding panic. One approach could have been to offer an exclusive interview to a friendly reporter who could convey the information in a neutral manner, framing the decision as a conservative approach to ensuring the company's health.
SVB could have improved its crisis communication by simultaneously releasing the press release and a news article. Moreover, they could have organized a press conference on Zoom shortly after the news went live to communicate the information calmly and systematically to their stakeholders. Finally, they could have released the news on a Friday afternoon, after markets close, to give people the weekend to digest the news.
Have the Courage to be Human
While I wasn’t privy to the Zoom call that followed the lackluster press announcement, it’s fair to say tensions were likely high for all parties. Even if there wasn't enough time to prepare some messaging FAQs for SVB's Greg Becker to refer to, at the very least, he should have been equipped with a list of alternative methods to reassure the people on the call and boost their confidence in the company, rather than using the word “panic.”
Furthermore, the call with SVB's CEO did not provide an opportunity for participants to ask questions. It's not uncommon for CEOs to want press conferences where they can have control over the narrative by not taking questions, even from sympathetic journalists. However, it's crucial to recognize that their willingness to answer questions reflects their level of confidence in their position overall.
The First Social Media Bank Run
Unfortunately for SVB, panic rose swiftly after their announcement. The stock price plummeted, Mark Suster of Upfront Ventures said he heard that "$12 billion exited from SVB...[or]..."6.5% to 7% of [its assets] that left in one day." This is likely the result of irresponsible actors like Peter Thiel, USV and Coatue sending messages and mass emails to portfolio companies to pull out funds immediately.
Bloomberg stated that Hemant Taneja from General Catalyst said while "investors were trying to do the right thing for their own companies" VCs could have advised startups withdraw six months of operating capital not everything.
Following the FDIC's takeover of SVB, the tech industry came together to support the bank and prevent further damage. Throughout the weekend, VCs, startups, regulators, and politicians engaged in conference calls and private meetings, leading to what the Wall Street Journal editorial board has dubbed a "de facto bailout."
For any company, maintaining a positive brand image is crucial, particularly when customer confidence is essential to its health. SVB's leadership appears to have overlooked the emotional impact of their outward communications. Perhaps the bank run could have been mitigated, and news of the bank's troubles could have remained confined to startup circles, rather than spreading worldwide as a warning of potential banking issues.
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Lisa Ann Pinkerton is founder and CEO of Technica Communications, founder and chairwoman of the non-profit Women In Cleantech & Sustainability, and co-host of The Earthlings Podcast. She was named a PR Executive of the Year by the American Business Awards (2020). She got her start as a broadcast journalist covering environmental science stories for NPR and PBS for over a decade.
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Mar. 17, 2023, by Bill Huey
A number of sound points in this piece, but I disagree that SVB’s press release should have been written for the proverbial “layman.” This deal was inside baseball all the way, with very sophisticated investors/depositors and Goldman Sachs working both sides of the street. The average layman never had a chance in the first place, but I doubt that there were many of them. Of course, the poor folks who were sellers on Etsy were much affected, but that’s life in the Valley for you.
And why on Wednesday? Probably Because CEO Greg Becker had flights lined up for travel to his $3.1 million home in Maui.