March 10, 2023: When SVB fell, 'Founder-Friendly' was put on trial

Three years ago, on March 10, 2023, Silicon Valley Bank was seized. Most commentary focused on duration risk and uninsured deposits. But March 10 was also a stress test for venture capital.

Crisis Removes Marketing

In good markets, everyone is founder-friendly. Every firm claims to be "value-add." Every partner talks about long-term alignment.

Then a crisis hit. That weekend, founders had payroll due in days, employees expecting deposits, vendors waiting, and no clarity from regulators. Cash was trapped. The only question that mattered:

The single, unforgiving test: Could your investors keep payroll alive when cash was locked and deadlines didn't wait?

Or would they use the moment to demand last-round pricing for new money, steep discounts, or fresh control - "rescue" capital that looked more like leverage?

Within hours, "rescue" capital began circulating. Many offers were structured to take advantage of founders in a bind - punitive terms, steep discounts, asymmetric control. Crisis removes marketing - and exposes incentives.

Given the rapidly evolving situation, we began talking to 100+ portfolio companies, assessing their critical needs and planning to bridge where we were a lead or major investor at our cost of borrowing only, or under special circumstances where other investors were not able to respond.

Alignment Is Not Using LP Capital

In a crisis, incentives are exposed.

We were clear from the start: it is inappropriate to use LP capital in this situation. We offered "no terms" personal loans at our own borrowing cost to our portfolio companies. We were covering those firms that couldn't respond because of their structure or were small. We urged other large VCs to also step up - especially those taking home millions in fees.

Alignment means absorbing discomfort ourselves - not outsourcing it. Many firms had the balance sheet to help - but chose not to. In a crisis, that choice is visible.

Real venture assistance shines brightest when it's inconvenient, unglamorous, and expensive - when the phone rings off the hook, founders are sleepless, teams face bounced checks, and the only reward is not screwing over the people building the future.

Investors Need to be Value-Add

Investors often describe themselves as value-add. March 10 was the moment to prove it. Value-add? Please. In a genuine crisis, value-add isn't warm tweets, Zoom check-ins, or recycled advice. It's cold, hard cash wired fast - no strings, no theater.

The answer was simple: offer emergency cash to your startups - no documents, no terms, no leverage. Just send money. Founders should not have had to carry that stress alone.

That is what value-add looks like under a liquidity crisis.

Do Not Blame Founders

Every systemic shock invites hindsight. Some suggested founders should have diversified treasury more aggressively.

But in moments like this, we need to be value-add, not blame founders. Founders already carry enormous stress and risk. We exist to absorb the shock so companies can continue building, not amplify the stress.

Government Has a Role. So Do We.

The Fed has a role here: regulators need to step in and backstop depositors. But so do VCs.

Public backstops matter in moments of systemic fragility. But venture capital cannot rely on public intervention as a substitute for our responsibility.

Signaling Stability Matters - But Wires Matter More

We also joined 300+ global VC firms to publicly support SVB in its new incarnation and signal confidence in the ecosystem. Collective signaling helped stabilize sentiment.

But statements are easy to sign. Cash out of pocket is where the rubber meets the road.

Sympathy tweets flowed. Actual wires? Scarce. Too many firms saw distress as leverage - demanding new docs, harsher terms, "restructures," or just ghosting while founders begged for payroll relief.

Very few firms actually wired emergency capital to founders before government certainty arrived. The vast majority offered sympathetic words - not liquidity.

That's being a vulture in venture clothing.

The Lesson Founders Should Remember

The superficial takeaway was "diversify your bank." The real lesson is about your investors. When things break, will they show up?

The real, harsher lesson founders must burn into memory: Your investor's true runway is their willingness to absorb risk when everything breaks.

In times of crisis, our venture assistance is all the more evident. We personally provided loans to startups affected by the SVB crisis, no terms, no LP capital, versus those who were predatory at this time.

This is what our philosophy of venture assistance means in practice: going beyond capital investment to provide tangible support, and showcasing a level of involvement and empathy not commonly seen in the venture capital industry.

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