Kinfield’s Nichole Powell shares a realtime recap of a financial nightmare.
The last few days have been a frightening whirlwind in the world of finance: On Friday, Silicon Valley Bank became the biggest American bank to fail since 2008, setting off all sorts of alarm bells about what that could mean for the economy moving forward — and what it did mean for the companies who had deposited funds there and suddenly found themselves with zero access to their money.
The entire ordeal is complicated, but essentially, what happened at SVB is an example of what’s known as a bank run. SVB had billions of dollars in deposits from its clients, and it funneled much of that cash into allegedly safe investments, like long-term bonds. Then came an unfortunate mix of economic conditions that devalued those bonds and spooked SVB clients, who then sought to move their money ASAP. The problem? The bank didn’t have enough cash on hand to pay everyone at once. (Check out a thorough explanation of the debacle right here.)
On March 10, federal regulators shut the bank down. On March 12, they announced the government would take emergency measures to ensure all SVB customers had full access to their deposits, even if that totaled more than the $250,000 that’s guaranteed to be insured by the Federal Deposit Insurance Corporation (FDIC). On March 13, President Joe Biden addressed the nation, declaring that “the banking system is safe” and promising a thorough investigation into both SVB and Signature Bank, another financial institution that was shuttered over the weekend.
This complex financial web can be challenging to wrap your head around, so we wondered what it looked like for individual entrepreneurs. To find out, we caught up with Nichole Powell, the CEO of Kinfield, a four-year-old company that makes better-for-you sunscreen and bug spray (and is one of our partners in Katie’s Shop). Kinfield kept all of its assets with SVB, so the realization that everything had been frozen was quite startling, to put it mildly. Below, Powell shares how it all happened.
Katie Couric Media: What has your emotional state been like over the last few days as this unfolded?
Nichole Powell: It’s been a wild and terrifying ride these last few days trying to figure out what is happening and what to do next. Cash is king when you’re working with a small business, especially when you’re producing physical goods and you’re paying employees. I woke up on Friday and we no longer had access to our bank account. We had zero dollars and zero cents.
What does that look like? You open your bank account and literally your balance is zero?
We couldn’t get into our bank account. There were rumors going around on Thursday, and people started to get concerned about what was happening with Silicon Valley Bank. There was effectively a bank run — a bunch of very influential people panicked and told all of the companies that they support to pull out all of their money. So on the advice of our CFO and some of our investors, I started the process of moving some of our funds, just to make sure we could cover payroll if something happened. Unfortunately, that did not go through before the bank essentially froze on Thursday afternoon. We were hoping a solution would be put into place overnight, and when we signed on on Friday, we no longer had access to our bank.
I have four employees. It’s one thing for me to cut my own salary, which I did immediately, but my employees have mortgages, children, and families. These are people that I need to make sure can get their paychecks. There’s a long-term effect on a company and, of course, wanting to get assets back. But first and foremost, we as company owners and leaders need to make sure that our people can get paid, so that was the scariest thing.
Did you miss payroll on Friday?
We were actually quite lucky. Our payroll cycle had just been taken out of our account on Wednesday, so it went out on Friday as it was meant to. But a lot of companies were not in that position. And there were also companies where, even if they didn’t bank with this particular bank, they may have used a payroll provider who did.
How long has Kinfield banked with SVB, and why did you choose them?
We have been with Silicon Valley Bank since the very beginning, and that’s for a couple of reasons. Startups like our small business are very high risk. A lot of traditional banks won’t work with you until you’ve been in business for a number of years. We all know the stats; something like 90 percent of new businesses fail within the first year. So a lot of traditional banks don’t want to take on that kind of risk. Silicon Valley Bank said, “We understand that risk. We’re working with your investors. We’re working with your investors’ investors. We’re working with your peers. So we are happy to work with you from the get-go.”
So we went with Silicon Valley Bank on the advice of friends of mine and some of our investorks. They were the 16th largest bank in the country, and they were a very low-risk institution. They were the right choice for us because they understood our business model and had decades of people saying they’re an amazing partner to work with.
How much of your company’s assets were deposited at the bank?
One hundred percent of it. I learned the “don’t keep all your eggs in one basket” lesson really, really hard on Friday. There’s been a lot of discourse online about, Why don’t businesses keep their money in 10 different banks? That’s not our business. Our business is making great sunscreen and bug repellent and co-hosting great events. We’re not a financial institution. I’m not here trying to finagle all of that. But yes, unfortunately, SVB had all of our assets. We have other credit cards that are outside, but that was all of our cash.
SVB had billions of dollars of deposits, and more than 90 percent of them were reportedly over the $250,000 mark of what’s insured by the FDIC. Were your deposits above that mark? And if so, by how much?
I’m going to politely decline to comment on our particular situation financially, but I will say that a small business can employ up to 250 people. So if you think about something as simple as making payroll: If the median income in the U.S. is between $50,000 and $60,000 and you have 200 people who are all making that, your biweekly payroll is more than that $250,000. So for the FDIC to insure that amount is helpful, but it makes it difficult when you think about companies trying to employ a lot of people. I know I have friends who had recently closed large deals or rounds of fundraising, and they had millions of dollars in their bank accounts. And that was just wiped out.
So once you realized you had no access to your account or the money that was in it, what did you do next?
We saw the FDIC’s press release saying they were taking over SVB. The FDIC is one of the most terrifyingly efficient parts of our government, so that was perhaps alarming because it meant the bank was fully done. This is not a bailout. The bank is done. There’s nothing left to bail out. At this point, they’re just trying to make depositors whole.
So when that announcement happened, my first instinct was, OK, we have to operate as though that money no longer exists. We might get it back on Monday, we might get some of it back in six months, we might never get it back. I immediately reached out to our team, and we started a list of all the cash expenses that we have coming up and exactly what day they are going out. We needed to get another bank in place and figure out how we’re going to get cash. I will say, I have never been so touched by the partners that we work with. A number of folks immediately offered cash infusions, even if it was a short-term loan to be able to float us for a while.
The government said it would get all of SVB’s customers full access to their deposits on Monday. What’s the most recent update on your end?
We were finally able to get back into our online banking Monday morning. It took two hours of me and our accounting team anxiously refreshing. We kept timing out or getting a 503 error. But when we were finally able to get in, we initiated a wire to transfer the majority of that balance [which was at SVB] to our new bank account, so hopefully, we’ll have our funds back. Like I said, the FDIC is terrifyingly efficient, and thankfully we are waiting to see if that wire is honored and goes through. So now we’re refreshing our new bank account — but thankfully, that one at least has service.
[Editor’s note: Around 9:30 p.m. Eastern on Monday, Powell confirmed she had successfully received the deposit into her new account.]
What bank are you working with now?
I’d rather not say, just because we’re still hammering everything out. But it is a major bank that a number of my friends have worked with. At this point, we now have the luxury of being four years in as a company, carrying a healthy amount of cash and a healthy amount of credit, so we’re now considered a valued and appreciated customer by other banks, whereas we may not have been in the very early days.
There’s been some critical chatter online from people who say they don’t feel bad for the companies this has affected because they’re the one-percenters of tech and they should be smarter about where they keep their money. As a smaller company with only four employees, what’s your reaction?
I understand that. The challenge with this is that the most vocal spokespeople about all of this in the earliest days, when it started happening, were a lot of the well-known names within tech. It’s these big investors who have been responsible for growing and supporting a lot of those really big 1 percent companies. So it’s natural that people assume that must be all SVB clients because that is some of the SVB clients. But those companies have massive financial teams. They probably do bank with a lot of other banks. The companies that were hit the hardest were not necessarily in the 1 percent.
I understand the criticism, but at the same time, we’re not carrying some massive bank account balance. I’m just trying to do what I can to make sure that I can pay my employees.
What’s your biggest takeaway from this, in terms of financial strategy?
We’re definitely going to be operating out of two bank accounts from now on. But more than anything, it was a stark reminder of what you can do with very little. As a business owner, one of the biggest worries is, What if we run out of money tomorrow? And guess what? I just had that thought exercise all weekend long. In some ways, it will make us a lot leaner. It will push us to even more carefully consider the value of a dollar and also make sure all our bank accounts are secured. And I’m going to give my team a huge hug.