The Fall of SVB

Hey there,

Christina here with another LAE (that’s long ass email). I’ve got something a little different to talk about today and, as the name implies, it’s a long one. Thanks for hanging in ‘til the end with me in advance.

I want to start by going back to the start of the pandemic. It was March 16, 2020. I walked through the door of my then one bedroom townhouse in El Granada, CA and curled up in a near fetal position on my sofa. It was just after two in the morning and it had been, at least up until that point, the longest day I’d ever experienced at Farmgirl - and that’s saying something from someone who has worked more than a fair share of 20+ hour shifts for Valentine’s and Mother’s Days production. 

Unable to sleep, or to work, or to do anything other than simply be on the sofa, I began to replay the events of the last thirteen hours. The shelter-in-place order that had been released in San Francisco. The sound of the collective city wide alert sounding ominously in a collective drone on employees’ cell phones. The low level anxiety that we’d begun the day with reached a fever pitch as we scrambled to get the last of the orders that, as it would turn out in the very near future, we’d ever ship from our then warehouse in Potrero Hill. 

I felt gutted. In one fell swoop, and in less than half a day, everything I’d worked hard to build had been leveled. The bustling warehouse my team and I had grown Farmgirl to fill with almost 200 team members was now sitting empty. With the promise of a return to work in three weeks was already being labeled as overly optimistic, I’d made the difficult, but necessary, decision to furlough over 95% of that team. We’d sent them home with instructions to file for EDD and all the flowers we could fit from our coolers in their arms, bicycle baskets and cars with. 

In the, again, up until that point, perfect alignment of everything that could possibly go sideways, I was also freshly on my way to a divorce, which was a decision made just four weeks earlier. I’d signed just about all but the company that I’d just dismantled that day over to my now ex-husband. The past ten years of my life felt like they were evaporating in front of me that night. 

It would be an understatement to say that I spent the last three years trying to claw my way back to a version of pre-COVID business. As a solo bootstrapped entrepreneur getting scrappy comes with the title, but I found new depths of meaning for that scrappiness as I fought to rebuild my team, our distribution, our supply chain and so much more after that day in March. But scrap we did, and over time the new normal just became normal. And then came last Friday. 

I got the news that our bank, and by now you most likely know the one, had been taken over by the FDIC from my Chief of Staff. And via text no less. I was sitting in a Zoom meeting, preparing to finish work and making plans to unpack that night and into the weekend. I’d left that one bedroom back in El Granada and relocated to the PNW during the pandemic. And, only a few weeks back, I moved for a second time. But reading the words “Did you hear the news about SVB?” on my phone I felt, in an instant, like I was right back on that sofa. All alone, once again, in the dark, and spinning out on a list of eventualities that was growing longer by the second.

It’s been four days now since I got that text and, to put it very lightly, it’s been an emotional roller coaster. I’ve pored over news articles, obsessed over Google alerts, been on countless phone calls and Zooms with peers and colleagues and any other friend of a friend or contact I could find all to help discern rumor from truth. And I’ve spent hours devising scenario plan upon scenario plan and trying to figure out ways to secure enough operating capital to keep the company going. I’ve tried to read between the lines, and in between the line’s lines, for something that I could hold onto and plan for. But, just like back in 2020, this weekend was one for questions - not answers.  

To add fuel to the dumpster fire that was this past weekend, rumors began circulating that our secondary bank, First Republic, could potentially follow in the footsteps of SVB. With not one but both of our cash reserves in jeopardy, my usual exercise of worst case scenario was the worst it’s ever been. In times like these I turn to whiteboards and Excel to pivot plan a footpath forward, but being potentially disconnected from every bit of cash my team and I had worked to put in the bank there was one glaring difference between this obstacle and every other one we’d managed to make our way over before: maybe this time there was no way out/over/through. 

At the time that I’m sitting down to write this email (Monday night to Tuesday AM), I am happy to say that, for as bad as things looked at the end of last week, at the start of this one they’re looking up. Through the interference of the FDIC and government all the deposits made by clients of SVB have been made accessible. We will most likely be made whole over the course of the next week. We’ve also been able to secure the funds from our secondary bank, First Republic. It’s not an overnight fix but it looks like what’s ours will be ours once again - and very soon. 

Before I go further, I want to say that as a business owner and as an entrepreneur with a team I am feeling EXTREMELY grateful that the federal government stepped in to protect our deposits - and those of so many other small and medium-sized businesses. To think of losing the dollars my team has worked so incredibly hard to earn, at no fault of ours, was soul crushing - especially because of the particular brand of hard our (and so many others’) work has been during the uncertainty of the pandemic. 

But beyond gratitude, I will be honest that I am also angry. Angry because of the hours and days spent worrying about potentially having to, at worst, shutter a business that we’ve worked so hard to build and to save over and over again these past few years. We’ve also done this work without any of the outside capital other companies have had to make that journey a little easier - and faster. To think that we trusted a bank with our working capital, without receiving anything in return (the business interest rate is still .001%) all while they benefit from using (and investing) our money, and then have no legal obligation to give it back, has been hard to stomach. Banks are a business, yes, and businesses do need to make money to operate, but if the rumors are true and bonuses were cashed out the day before the seizure, and the CEO was able to cash out stocks, the only ones who lose in this situation are the businesses that trusted SVB to do its job - to protect and store cash reserves - while they, while we, did ours/theirs.

And now that we have some sort of resolution, I will be equally honest in admitting that I am exhausted. Exhausted physically from not sleeping, but also mentally exhausted from the ticker tape of numbers, scenario planning and the pros and cons of Plan A/B/C/D (and so on) that I’ve been doing since the moment I found out. I spent my entire weekend planning, checking boxes, reading every update I could get my hands on and mostly just trying to balance being so fearful of what could be while simultaneously telling myself there’s no need to worry until I know something definitive.

Because, for as many tight spots and Plan Z’s and oh shit moments we’ve found ourselves in at Farmgirl, I’ve always, always found that the path forward means putting my head down and getting to work. Early on this meant making bouquets, or delivering bouquets, or getting up even earlier than my usual 3a wake up call to make sure I could get every stem I needed from the vendors at the flower market for my orders at that. As time has gone on, my day has shifted from the workbench, moving from one bucket of flower to another until my quota was done, to the spreadsheet. Or, as the case is these days, the Zoom meeting. Jumping from one meeting to another until 6p or 7p and I can start my second shift - financial planning or pivot table’ing until 1 or 2 AM in the morning. Work, and sometimes more work, has always been the answer. But in times like this one, when there is nothing to do but wait for the outcome that is being decided by someone or something else for you, work is just a futile exercise to fill the time until you know how and when you can get your feet on the ground and start moving forward. 

I could say so much more than I already have, but suffice it to say that, for the ultimate jump scare these past few days have turned out to be, I am grateful for the outcome. For any other business owner and entrepreneur that was also affected by the SVB or Signature closures, I am so sorry. And I can’t say anything other than I am right there with you. In the snippets most outlets are using to report on the clients of SVB, there is a lot of talk of tech and startups. But the faces of this bank are much more than the ones that you usually associate with Silicon Valley. I founded and funded Farmgirl on my own, with $49K of my personal savings. My team and I have bootstrapped it to the business that it is today, sending our burlap-wrapped bouquets, shippable vases and more to recipients across the lower 48. And ours is just one story. Not every client at SVB is venture- or PE-backed, nor does that not necessarily mean that SVB’s closure endangers the paychecks of those business’ employees any less. 

Now that Farmgirl’s financial future is more secure, I am, as usual after a crisis of any shape or size, looking for takeaways and learnings. And I have a few I wanted to share on the off chance it prevents even just one person from the situation we (and so many others) found ourselves in this week.

First, diversification is way more than just two banks. I know that for most businesses, it’s not feasible to only have the FDIC insured amount at any of your banks (although woah, I wish we could!). As you grow, payrolls and expenses alone will prevent that from being an option. But in down economies, my opinion today is to diversify as much as you possibly can manage. And, even more than that, make sure one of your primary accounts is with one of the giants in the banking world. Even though they usually don’t offer a lot of the perks (like personalized bankers and amazing customer service) for smaller businesses like us. As someone who votes with my dollars, I want to support companies I believe in, companies that might not look like ones or act like ones doing business “by the book.” Especially in a “traditional” sector like business, this  is exactly why I went with First Republic in the first place. At the time I set the account up, a woman of color was running the bank. And, in an industry where representation is so lacking, I wanted to make the choice to bank with an organization that was changing what leadership looked like. And while that’s not an intention I plan on changing, I also now understand that safeguarding my team and my business means also choosing to work with the monoliths in this sector, even if their ideals are not as aligned with my own.

Second, I’ve learned that our money should be working for us better than it was. As a high schooler back in Indiana, I started to hide cash I’d earned at my three fast food jobs in tin cans all over our farm. It was a savings account, of sorts, one that I’d use to help me move to NYC two weeks after I graduated. And while I can’t say that the money was doing anything for me (or the veggies growing in that same yard), it was safe. Now that I’ve moved off the farm the whole tin can thing isn’t as practical, but I’ve also learned it’s not earning any interest, either. If your money can make the same amount buried in your backyard as it can in a financial institution that, ultimately, doesn’t carry any risk or obligation beyond the $250,000 of FDIC-insured funds,  then figure out a better way to make it earn at least enough to justify the risk you’re taking exceeding that insured amount. 

And last, pay yourself. For years I’ve struggled with paying myself market rates or taking money off the table. I’ve talked to countless other women in business who have struggled with the very same. Truth be told, I’ve never paid myself market rates for a CEO/founder– usually opting to pay myself between 10-50% of my peers and telling myself that I’ll get “it” at exit. But the truth is, an exit is just one possible outcome. For Farmgirl or for any business. And, as the SVB closure goes to show you, the other potential outcomes may come about by circumstances well beyond your control.

The potential to risk everything, to sacrifice just about everything that is sacrificable in life, and still walk away with literally nothing, is a very real possibility as an entrepreneur and business owner. You may not be able to plan on tomorrow but you can plan on today and an important part of that planning is paying your team, yourself included, equitably. 

If we’re looking at diversification more broadly, you and your personal finances are another risk management tool in your kit as well. If you pay yourself fairly, and maybe even take some money off the table when you can (and that moment is WAY before you’re probably telling yourself you can), you can, in instances like these, be another resource for the business. I spent so much  time this past weekend making spreadsheets of how much I could personally get liquid – borrowing from my 401k’s, cashing out investment accounts, taking out more credit cards, etc. Had I just taken some money off the table when I could have, I could have put the money back in when we needed it. And I would have felt about 1000x better this past weekend if that number at the bottom of my personal liquidity spreadsheet were way higher than it is. So pay yourself. If not for yourself, then for your company - so you can be an asset, too, if and when the business needs it. 

And that is, for lack of a better way to phrase it, that. I am hoping the lessons I am walking away with will make Farmgirl a better business, and myself a better leader for Farmgirl. And, if you’ve also just gone through what we have this past weekend, know we’re with you and that we’re here for you. If there is anything we can do to help, please reach out.

For everyone else still reading, as always, thank you for your continuous love and support. You are the reason we get up and do what we do every day, and the reason that keeps our team going even and especially when the tough becomes the toughest. 

xx, 

Christina & Team Farmgirl