Founder Considerations for Communicating in Complex Situations

Much has been written about the SVB meltdown and the need for startup liquidity and cash management, the tightening loan environment, and treasury management.  And while many of these issues remain at the forefront given the uncertainty and risk in the macro-economy, we believe that one of the most time-tested and important tools for Founders to have in their arsenal are well-established principles that help guide us as individuals and as companies in complex situations.  Through wrestling with principles, we both make better decisions and improve our decision-making capability.

One such principle that has been in short supply: When there is a run on the bank, channel your inner George Bailey.  More specific to the times we’re living in, during circumstances where information moves at the speed of the internet and rumor cannot be discerned from fact, overarching principles can help prevent bad decisions from being made, and can help increase the likelihood that good decisions get executed.

The SVB failure and ensuing regional banking crisis is but one of many cascading risks we cannot escape, and in an effort to avoid ‘brittleness’ we share these principles with the appreciation that every company’s situation is different.  As Founders, adapt the following to work for you and your company:

COMMUNICATE OFTEN AND WITH REASONABLE TRANSPARENCY

Regardless of the decisions you are making – and whether you even have enough information to make decisions – communicate with stakeholders often.

Employees – Who Will Read Every Word and Non-Verbal Cue

• Your employees will generally assume something worse than the actual situation (at least some of them)
• Have an all-hands conversation as soon as is feasible, letting them know your expectations and how you are planning for unforeseen occurrences
• Be careful not to confuse reasonable transparency with complete transparency.At the beginning of the SVB meltdown, the government was obliged to say that there was a chance that only $250k might be available, even though that possibility had low probability.  For those who believed it was likely their cash would be available sooner, and that the company could continue to pursue its mission with minimal disruption, there was no benefit to over-communicating, the low-likelihood chance that the world could collapse.
• If at all possible, founders who were ready to tell their team that they would be able to make payroll in all circumstances for the next couple of months, while things played out (see below for investor communications) found themselves in a much better situation when the FDIC announced their backstop
• Informing your team in the middle of a torrent of information that you know there will be much more news each day, and that you are monitoring developments as they happen conveys calm leadership and security, even if the reality may be different
• Agree to communicate with your team on a cadence that makes sense to you as a company (and ad-hoc as significant information unfolds)
• Be honest, but not necessarily brutally honest. We’re supportive of transparency and radical candor, but in times of crisis, people don’t need another reason to panic

Customers – Communicate Stability

• What’s worse than a company that’s only a few years old without much money in the bank? That same company without a bank.
  • It’s certainly not easy to navigate, but you signed up to be a founder.
  • Remember that many others going through the same situation can relate to you
• Be clear, position things well, and be honest
• Let your customers know whatever you can share that will increase their confidence in your stability

Suppliers/Landlord/Partners – Seek Support If and When Needed

• Understand and appreciate that each company’s situation is different, which will govern how they respond in difficult moments
• If you are in good shape with finances for the foreseeable future, communicate it to your suppliers to reassure them
• If you are in a difficult situation, seek flexibility from them – be creative; through effective communication (especially in situations where the crisis may be short-term and not of your making) more options will emerge with suppliers
• If you could be in a difficult situation IN A FEW MONTHS BUT NOT YET, be prepared:
  • Create a plan of how you will communicate with suppliers when the time is right
  • Determine the triggers/criteria that will determine when/if you will implement the plan
  • Communicate the plan to your Board
  • Monitor emerging events to reevaluate the plan and criteria
  • Avoid implementing the plan too early, as supplier fatigue will be your enemy

Investors – You Need Each Other More In Difficult Times Than in Good Times

• Only some investors have been through anything like the SVB situation (but that won’t stop many of them from giving advice as though they know exactly what’s going to happen)
• Investors want to help, but they need (and hopefully want) to be led
• They want to see you as a calm steward of the company, planning for the likely outcomes, and developing contingencies for the less likely (but possible) outcomes
• You want them to back-stop you if your money is tied up for a while
  • Help them appreciate that your team needs to know short-term payroll is assured.  If it’s not, you need to be transparent that the company is likely to run out of cash
  • Investors need to do whatever they can to be there for the company (e.g., short-term loans)

• You all want to share information as soon as it’s received to help make timely, well-informed decisions.It’s a balancing act.
  • There are times acting swiftly is paramount
  • There are times when determining you need more information to make a decision is prudent
  • Don’t create artificial deadlines to make critical decisions; rather, set dates to reflect on new information, (e.g., “If we don’t have clarity by a week from Monday, we will have another discussion to determine any new course of action,“ is much better than, “If we don’t have clarity by a week from Monday, we will cut our burn in half”).

• Set up an informal group so you can be nimbler in your responses to specific crisis situations
• Make RECOMMENDATIONS to your Board/investors seeking input (and approval when needed), don’t ask THEM what to do. If presenting options, have a preferred option
• Have contingency plans.Things happen – especially in times such as these…especially in startups.
• Separately, communicate with ALL investors in a written format designed to exude calm thoughtfulness and preparedness.Offer to listen to them if they want to reach out

In most complex situations, appreciate that you are only one of many companies navigating uncertainty, and that everybody is touched in some way by the historic events we’re living through. As with any complex situation, seek advice from people you trust, and in the end, use your best judgment to make the best decisions you can.

Know that the entire team at Blackhorn is with you for every step of the journey, in good times and bad.