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.

Could you start by walking us through your experience, how you ended up at Blackhorn, and what each of your previous experiences taught you?

I started my career as a big company guy. I spent six years with McKinsey and Company and then five years at Becton Dickinson, a $20B medical technology company. I had wonderful experiences there, both on the strategy side and then eventually as an operating person. But in 2000, the entrepreneurial pull was too great. I moved to Silicon Valley and worked as an operating leader in four different entrepreneurial companies, in telecommunications and then in medical technologies. At my heart, I’m someone who loves to learn. In a startup, you are faced with decisions all the time, and you can figure out, sometimes within minutes, generally within a week, whether that decision was good or bad. I really love that this allows you to learn iteratively, both intuitively and analytically, and very, very quickly.

Working at a startup can be quite challenging, what was the most important skill that you think it taught you?

I think the balance between making decisions extremely quickly, which is an instinctive thing to do at a startup, and making decisions methodically is very interesting. It really does depend on the situation, depend on the company, depend on the magnitude of the decision. Eventually, you learn, and you figure out how to make decisions at the right time. I think a lot of entrepreneurs have tendencies that they may not be aware of to make decisions either too soon or too late. There are lots and lots of examples of that which I’ve seen throughout my career.

What advice would you give to a first time founder who’s really interested in becoming an entrepreneur, but isn’t sure they’re ready to leave their day job and go for it?

I think a lot of these lessons come from my experience as a lecturer teaching entrepreneurship, first at the Haas School of Business for about 10 years and now at Stanford for 10 years. I’ve seen a lot of aspiring entrepreneurs, while I’m teaching them and then for years afterwards as we stay in touch. My biggest piece of advice is that there is no definitively right or wrong time to start a company.

For most people who are entrepreneurs, they will be more effective entrepreneurs if they also get experience working at companies that know what they’re doing. They will learn what works, what doesn’t, and what they should adopt in their own venture. By working in a larger company, you’re going to develop more skills, and most likely you will come up with an idea of a company to start.

Conversely, if you have a great idea that is calling you right as you’re leaving school, and you have the beginnings of a team, and people are following you, by all means start the company then. You might wind up working at a larger company afterwards, and then you’ll be better at doing that. If you think two or three chess moves ahead in your career, it’s kind of freeing. You realize, “Wow, there are different ways I could move on this board and still wind up where I’m where I’m trying to get.”

If you have a compelling idea then by all means go for it. If you don’t, by all means, go somewhere where you’re going to get experience. Go somewhere where you’re going to learn a ton, and then you’ll bring that to whatever you wind up doing as an entrepreneur.

What drew you to teaching?

I’ve been a teacher at heart ever since I was a little kid. I’m the oldest of four boys in my family and have always enjoyed mentoring and teaching. I think I have been a teacher in everything that I’ve done. I left McKinsey after my first two years to teach high school math and coach tennis and soccer which was a wonderful experience.

I really try as a teacher to provide information or ask questions to allow someone to find his or her own approach, rather than say, “Well, this worked for me, so it should work for you.” What I really love is helping figure out what would make the most sense for that person in that situation in that industry at that time. Overall, I enjoy helping great people achieve great things, whether that’s teaching, mentoring, or advising in whatever way I can.

Do you think that experience as a teacher affects the way that you approach venture capital?

Yeah, I think that approaching things as a teacher or as a mentor is a good mindset for venture capital. I don’t believe that venture capitalists or investors are literally “on the team” like some people say. They aren’t there with the founder and the founding team putting in 80 to 100 hours a week for that company. Thus, I find it presumptuous of somebody who’s an investor and gives advice, or money, or governance to feel as though they’re part of the team. I prefer to be a sounding board and available to help the founder when they need help…in whatever way they need it.

Nonetheless, I do feel as though I develop a fairly deep trust-based relationship with the CEOs that I work with, that I’m somebody they can call when things aren’t going so well to help them come up with the best answer for them. It also helps that I have been an operator, and I’ve seen some of these movies before, so I can help them see around corners. These are relationships that go beyond a typical VC-CEO relationship. In order to be a reasonable sounding board for someone, it certainly takes a lot of extra time and energy because you need to have a decent amount of context about what’s going on. It’s not something that you can do episodically once every quarter at a board meeting, or even once a month. You need to have much more frequent interactions to have the right context to be helpful. I’m thrilled that Blackhorn Ventures has given me the opportunity to do that as an operating partner. I really appreciate them for putting me in a situation where I can do that successfully, and allowing me to spend the extra time and energy with the companies that I work with.

Which portfolio company are you particularly excited about?

That’s a tough one because there are a lot of really exciting companies in the Blackhorn portfolio. One that immediately comes to mind is Aperia Technologies. Their idea is just brilliant. They attach a device to truck wheels, which uses the rotational motion of the truck wheel to create enough pressure to keep the tires inflated to their optimal pressure. It’s a very simple idea, and these folks have developed a fantastic device that does this really well. The company is growing two to three times per year, and they now have billions of miles on the road. Their approach also has predictive value for trucking companies because they can monitor when a tire is having trouble, and when it’s having serious trouble and needs to be replaced. They’ve been able to develop a sales system for very large companies, and they’ve landed a number of really great accounts in the last couple of years. It’s just poised to be just wonderful.

It’s a combination of a deep technologist and a technologically oriented CEO as co-founders. They are an amazing group of people. What I’ve appreciated the most about working with them for ten years is that their values, their principles, and the way that they do things are extremely aligned with our values and principles at Blackhorn. It allows me to again be a very close advisor to them because I can very much relate to how they do things.

Aperia is also a classic Blackhorn Ventures company in terms of its position at the intersection of multiple areas that Blackhorn has a perspective on. It’s an energy oriented opportunity. It’s a transportation oriented opportunity. It’s a supply chain oriented opportunity. It’s a precursor to some autonomous capability because your ability to track and measure things like tire pressure is on the path towards that. So there’s a bunch of areas that all come together, and Blackhorn Ventures does an effective job of having perspectives in individual arenas, but also then having perspective on how those arenas come together. That way we can make better decisions about what makes sense as an investment based on those intersections.

What do you think is most valuable for founders about working with Blackhorn?

Well, I’m really big on principles. Similar to Ray Dalio’s approach of having principles of how you want to run your firm. Blackhorn Ventures has adopted certain principles about how we work with founders, how we behave in Board meetings and in between board meetings, how we comport ourselves in the investing process, and how we continue to support companies as they continue to succeed. It’s an approach that resonates well with entrepreneurs. It’s easy for an investor to say that they are founder friendly, and many of them will have that on their websites. For some firms, founder friendly means that they let you keep your stock when they fire you. What you’ll notice with Blackhorn is that the founders that we work with are excited to work with us again. If you call up a few founders that we’ve worked with, you will find a group of people who appreciate the principles that we bring to our relationships with them.

What is it about Blackhorn that you enjoy most?

So the obvious answer is the team. I was trying to come up with a less obvious answer, but I will just say that everybody associated with Blackhorn Ventures is a well meaning, thoughtful, principled person, and someone that I truly want to be a partner with.