Our SVB Story & Why You Need Multibank Cash Management More Than Ever

Joseph Drambarean (00:07):

All right, well, here we are. We’re in studio. We’re actually here at Trovata. This is Trovata’s headquarters here in Solana Beach in San Diego in North County San Diego. And this has been a long time coming, to do an in-person pod. I mean, with everything that’s happened with COVID. I mean, this is just such a milestone for us to be doing our own media production. So I’m really excited and I felt like today was the perfect day to do this kind of setup because we’re going to be doing a big topic today. We’re going to be talking about what happened with Silicon Valley Bank, what’s going on in the banking industry right now. So I just felt, let’s pull out all the stops. Let’s do it right, and let’s have an honest conversation about what’s going on in the industry right now. So this is Fintech Corner. Really excited about today’s episode. I’m joined by Brett Turner, our founder and CEO. My name is Joseph Drambarean, and I’m the Chief Product Officer here at Trovata, and I’m excited to dig in to today’s topic.

Brett Turner (01:16):

Yeah, me too. It’s been a crazy week. I mean, you look at, it’s been an emotional week. I mean, you deal with all this different stages of emotion and including anger, including there’s, you can’t help but feel a little panic when you go through some of this. But at the end of the day, you’re also kind of wired to just, you’ve got to stay the course and you’ve got to stay in the game, and you’ve got to stay calm and you’ve got to work through it. So yeah, it’s been a crazy week. I think maybe first off, maybe the first thing, can I be upset about SVB, that it’s kind of got us off our game a little bit in that I completely forgot that it’s St. Patrick’s Day today and that I did not wear green? So I mean, can I blame SVB on that too?

Joseph Drambarean (01:55):

I’m wearing green. This is totally, I promise you this is completely unintentional. Wow, that’s really lucky.

Brett Turner (02:04):

So that’s maybe one thing, it’s like, “Man, how did I miss that?” It’s been a crazy week.

Joseph Drambarean (02:09):

Yeah. So how do we begin? I mean, this is an emotional week because first of all, it impacted us. So there’s a story to tell there. What happened, how did we see it, the whole thing play out. It impacted our customers, so that’s another angle. I think that we have a unique perspective because of the fact that we had this duality. We have a moment that’s emotional. Our customers have a moment that’s emotional. It’s in the space that we’re in, right? Bank connectivity, bank payments, all the things that are just so important to what we do as a business. And it’s all playing out in real time. It’s extremely public and it’s fluid. And I just thought, what if we start with the story, the honest story of what happened? You and I were texting on Thursday, we were obviously very aware of the situation. At the time we thought it’s a major bank, we shouldn’t be worried. And that’s not what happened. So take me through it.

Brett Turner (03:19):

Yeah, I mean, just texts, different things coming in. You don’t quite know how to filter it because it’s a little, you don’t know whether it’s real or it’s a little nonsensical or how serious you should be. I think even just seeing where the markets were that day and going down, and still for me even, I’ve been doing this for a long time and Trovata’s my seventh startup and have been a CFO of three startups that have scaled and managing cash is just at the forefront. And liquidity, all of that is just always kind of top of mind. It’s what we do as a company, right? So even then seeing the markets and how big, at the time, all the banks in SVB was down, it still wasn’t crossing my mind thinking that our deposits were at risk. And that could even be a thing that, yeah, even out on the heels of 2008, it’s still just, it wasn’t going through my mind at the time when that stuff’s coming in.

Joseph Drambarean (04:16):

And obviously we’re looking at this purely from the, well, what’s going to happen with our connections? Because we’re thinking operationally constantly. We’re not thinking about what’s going to go on with our own liquidity, all of that. We’re thinking, well, we have tons of SVB customers at Trovata. It’s one of the most popular banks that we support. So what’s going on there? Are they in a situation where we have to almost have an emergency, everybody all hands on deck on this situation? And Friday plays out. We get the messages in the morning that they go into receivership, and truly no one knows what to do. They’re just questions, questions everywhere on the operational front. Have we lost access? And the answer was yes. Everything went down on Friday. And so we had to do an emergency on our side. We had to tell all of our customers that were impacted. We were scrambling through an analysis to try to figure out what is the true impact here. Turned out to be really big. And of course, we also were impacted in that moment. And so-

Brett Turner (05:26):

We were. We’ll kind of maybe a little later talk about, we all know now that multi-bank is a thing. I mean, that’s best practice. Big companies. We have a lot of, two-thirds of our customers are treasury teams. This is what they do. They’re the risk management pros. This is why they’re diversified across their banks, especially post 2008. It’s a big core of what we do with Trovata to make that easy with building APIs to banks in all of that aspect of aggregation. So yeah, we have a lot of banks, we have a lot of bank accounts ourselves, but like most other startups in America, I mean there was 55, 60% or whatever of startups pretty significant are having money at SVB. So we weren’t fully exposed, thankfully, but we definitely had a healthy bit of exposure there.

But I think you’re right. One of the first things comes to mind, you’re thinking of, we have a lot of customers and you’re thinking about downtime, you’re thinking about how many our customers, we have about 40. We had about 40 or 45 customers that have SVB as a banking partner of the overall $125 billion that’s managed on Trovata across our customers. There is $2 to $3 billion across those customers. So it was significant. And so there’s one part of where we’re seeing how it’s going to affect our customers, how we can really help them and press in. The other aspect, of course, is we’ve got a little bit of a fire drill even internally, of how that’s affecting ourselves and our own company.

Joseph Drambarean (07:02):

What was tough about the situation, I think, is that we always want to be transparent at Trovata, it’s one of our core pieces of our core culture. And that’s true not only of internally to our staff and how we handle our business, but it’s also true with our customers. We want to make clear what’s happening and how we are going to play a role actively in it. And this was just one of the first times I think in our history where we were caught flatfooted. We had nothing to say because we, just like everyone else, didn’t know. It’s an unprecedented scenario. So we actually learned a lot in this scenario. And obviously BAI being an important information pipeline. APIs are bread and butter, how we depend on a lot of the data, it all goes down. We know that this is a moment of crisis, so visibility matters more than ever, and we can’t offer it.

And we are also in this position ourselves where we’re scrambling for that visibility. The website is down, they’re not taking phone calls. We can’t even get support. And so how did we navigate that? What happened? Because I know that a week has transpired now. So if you’re on Twitter, if you’re on Reddit, you’ve probably read about a lot of the stories that played out over the course of the weekend. Some might not be fully transparent at this point because this is an emotional moment and it’s also a very vulnerable moment. So you’re trying to weigh, should we even talk about this? But the reality is that the healing process of what happened here is all about understanding the risks that played out and how we could all get better as a result. And without knowing what happened, you know, you can’t do that analysis.

And so we’re in it on Friday, got the announcement, we’re all internally scrambling. Now you are in the office. I’m actually here. If I recall correctly, we were going to do this podcast setup that Friday. It was going to be our first in-studio in-office podcast, and we ended up setting everything up and then not doing it because you got the text message of, “Hey, there’s a problem.”

Brett Turner (09:22):

Well, I think that was the thing too. We just weren’t quite in the head space to have you talking about that. It’s like there are just so many emotions and so many things going on, and who knows what would’ve been coming out of our mouths at the time. Right, wrong or indifferent. But yeah, I think when you look at Thursday, we were seeing so many of the signs, we’re reacting and then adjusting as what does this mean, and having to filter that in real time and then starting to take action. But we were affected. So of course we’re kind of scrambling what to do. We’re talking to our investors, we’re getting a lot of feedback, a little bit of what’s really came on Friday, more of the chatter from awareness from our employees. Obviously they’re concerned and want to know, but I think part of it was going through that and feeling like we kind of understand, at least start to moving very quickly proactively through that, we didn’t get money out.

And then we’re sort of just waiting for the next wave Friday morning. How are the markets going to open up? What’s truly going to happen? We’re only speculating at that point. Friday hits, and then we’re dealing with the full on what everybody’s waking up to. SVB is shut down and you just can’t believe it.

Joseph Drambarean (10:43):

Can I stop you right there? The bedrock of the international economy, the wire transfer, the thing that you’re supposed to trust in above all else. We lost trust in that. Just the implications and the magnitude of that moment, I just think are so consequential because we’ve been talking to customers for years at this point about APIs giving you this new format for immediate visibility, but also immediate transfer of funds in some cases like RTP as a new technology rail. And imagine that the ones-

Brett Turner (11:22):

It doesn’t work if the bank is down.

Joseph Drambarean (11:23):

Right, right, exactly. So that’s what’s interesting about this, is that, you know, you could have faith in those things and the rails, the wires, ACH, all of that, but exactly. If there’s something systemic happening, you’re kind of caught in the fray. And so okay, so we went through that.

Brett Turner (11:40):

But I think the other thing too is that you get this other aspect that was going on that was kind of uniquely different is that most everyone is in the same boat, right?

Joseph Drambarean (11:52):

Yeah.

Brett Turner (11:52):

You know, think of all the things too, and all the little subplots. Think of, we live in a very divisive world. We can argue about anything under the sun, and here’s something, like everybody in some ways, you don’t want these things to kind of bring people together, but in a lot of ways everybody’s kind of rallying around this thing. Everybody’s getting the rally call and we all need to lean in together and figure out what this means and the impact and help our customers and communicate well with our employees. They want to know. And I think those are some of the moments too, that you really, they build character. I mean, you also were looking to us. And you want to be transparent, you want to be really open about it, but you also want to be really thoughtful how you approach this because it’s a crisis that’s really happening and happening in real time.

And so Friday closes and then now it’s in the weekend, and now you’ve got two days to really stew on what this really means and what’s going to happen over the weekend, and is there going to be somebody come in, is there a white knight? Is the Fed going to step in and are the government going to step in? What’s it going to be on Monday? All those things that everybody’s kind of waiting on pins and needles too. So it’s pretty crazy.

Joseph Drambarean (13:07):

So why was everybody so terrified? I think that’s one of the things that we haven’t unpacked really, and I think it’s because of how unique of a scenario that it was. It’s not just about the fact that SVB experienced the liquidity issue, it’s the timing. It happened to be the weekend before payroll, right? Payroll was supposed to hit for all companies, really, that followed a similar model on Wednesday, which means that funds needed to be transferred by Monday to fund payroll. And if you were relying on operating accounts in SVB, you wouldn’t be able to guarantee that payroll would be funded with your payroll provider by Monday.

And so this whole scramble was not just about, “Hey, we have a liquidity issue.” If you’re a company that’s in a startup space, it’s also there are very real lives that will be impacted come next week if the sequence of events don’t play out just right for us to be able to get an answer for them. And so I think that was one of the parts that was most difficult to navigate over the weekend was because of the lack of answers. It was, we were lucky.

Brett Turner (14:21):

Well, there’s a few things. One is, and you read about it, $42 billion made it out, I guess, but there’s a lot of folks who are able to get through the website, and then it seemed to kind of open up a bit in the afternoon. And so it gave this sense of, “Okay, maybe I’m going to put in a wire now.” Then you’ve got all this chatter. It’s like, well, there’s this run on the bank that it’s amazing to see how much money went out of the bank and literally brought it down in that one day. You have all that stuff going on. It becomes a bit of a liquidity scramble because even if deposits, if the government steps in, when is the money going to come back? If a wire went out after the cutoff and didn’t make it through, is that going to be honored? Is that still going to go through come Monday morning? Is that going to actually go through if things do indeed shut down if the bank even opens up at all?

I think the other thing, when you’re talking about Monday being the day when the wires got to go through the payroll providers, so the employees are getting their pay checks for direct deposit on Wednesday. Now you’re seeing a lot of startups, a lot of companies having to get a lifeline in terms of borrowing. And I’ll just say in terms of our exposure too, whereas we also wanted to shore up liquidity too, one of the things that was just so helpful and maybe give a shout-out to one of our partners Live Oak, because we’ve had a venture debt line and we were, even though we had some of our security agreements on some of our accounts in SVB for that, they were a great partner and graciously said, “Hey, we’re going to work with you. We’ve got your back.” And we had not tapped that facility. And so we were able to draw down a fair amount of funds to help not just liquidity, but just, or just for payroll, but just also just to feel like giving us adequate liquidity, not knowing where things are going, giving us as much runway.

Joseph Drambarean (16:08):

It was such a fluid situation. It’s not just the best strategic thing to do, it’s more like we don’t know how this is going to play out. What’s also interesting about that moment was I’m sure that there were other companies that had similar facilities that were kind of rainy day scenario that they had played out. However, we also had a multi-bank environment at Trovata, right? So we had separate accounts with different banks, which allowed for us to be nimble in that moment. I think that was the key of why this was such a scary scenario for so many startups, was let’s say that you were kind of all legs in one basket with SVB, and let’s say that your investors were there to help you, or you had a credit facility that you could take advantage of. Well, where’s that money going to go? You can’t put it into your SVB accounts.

So now you’re in the boat of, can we sign up for an account over the weekend or on Monday to try to clear that wire into the accounts and then wire out of the accounts into payroll by the close of business Monday? And I think that that’s where another kind of aspect of all of this started to unravel was that that process, it’s basically impossible. You can’t set up accounts that quickly. There are some banks where you can do it, but that’s where this scrambled kind of got a new dimension in all of it, right? There was the liquidity part, which was the freak-out, oh no part. But then there was the operational part of like, okay, we have a solution. How do we do this? How do we even mechanically step A, B, C, D, move the funds where they need to be so that we don’t have to send that email to our employees saying, “Hey guys, we’re going to miss payroll,” right?

Brett Turner (17:59):

Well, and you saw part of this scramble was then there’s a lot of kind of newer, more digital banks who were then, you could open up accounts more quickly. So then there was, okay, money is going to be directed into those right away. But then now there’s also a little bit of a flight out of those now into a much larger bank into one of the big four banks. So it was almost like a temporary holding tank just so they could get money in there because you couldn’t open up a bank account quick enough at a JP Morgan or a B of A, for instance. So that, I think, is still even going on. But I think as dust is settling, this notion of we definitely need more than one bank partner, we need to be multi-bank. If you’re going to be multi-bank, how are you going to get really the intelligence on all that?

Are you going to then sign into multiple bank portals? Do those really have the things that I need there? There’s not a lot to that in terms of what you can get from a bank portal. You might just use it for a one-off wire or get check your balance.

Joseph Drambarean (19:00):

What if the portal’s down? What if the impossible situation like Friday morning where you can’t even find out what your balance is if you wanted to, right? It’s not just a matter of multi-bank, it’s having the infrastructure in place to have visibility. And the other thing that was brought, I think in a very violent way, to the limelight is the importance of this pure digital banking experience. Because part of the reason why this all happened was because now from a bank withdrawal perspective, it’s all digital. You don’t have to go to an SVB branch and take a big wire out. You could do it all on your phone.

Brett Turner (19:41):

I mean hopefully everybody’s seen the Jimmy Stewart days, the building and loan, and you’ve got scrambling and it’s people are then with pitchforks practically at the bank’s doors, and then they’re settling that whole thing down. But yeah, I mean now you’ve got this, what effectively was this bank run with $42 billion in one day. I mean, so one of the things that was interesting too, when you mentioned operational things for us that was maybe unique is that we have a file based feed with SVB and some customers have opted for that, but we also have their API through their OFX channel. And that was, it’s different, two different pathways. One’s more closer to an API, maybe not a true pure API, but it’s kind of closer to an API. The other is just kind of true SFTP passing a file. Two different channels, they both behaved a little differently.

Joseph Drambarean (20:35):

Yeah, it was interesting. Definitely Friday was the loss of visibility and then they came back online at various times over the weekend. And then of course on Monday, everything was back to normal because of how the Fed has stepped in and all of that. But the interesting thing about that is that you would assume that digital services would just be available, but this scenario kind of exposed the fact that that’s not the case. And so storage of data, unbelievably, was a factor in all of this. Because if you’re relying on real time data to tell you what your liquidity is, if that isn’t there, what is the last available piece of information that we have? Because you would need to make a decision based on that. If I need to dip into my credit line, how much do I need to dip into? Do I need to take all of it?

Brett Turner (21:32):

You’re pretty much taking all of it at that point.

Joseph Drambarean (21:36):

Exactly. Right, but the point being that you need some sort of backup. It’s almost like if, you know, it’s unfortunate that we’re talking about this.

Brett Turner (21:44):

Your balances, your history, all that’s stored on the bank portal. And you can’t access it. So what are you going to do? And then, you know, might have a semblance of something, an Excel spreadsheet or something, and maybe doing some more things there. Maybe it was a forecasting model you had. Well, it’s all old news, and if you don’t have something more up to date, at least yesterday’s balance, because there’s a lot of ebb and flow in there. So at the end of the day, but I think what’s interesting is for companies that were relying on this SFTP, pass the file, get it once a day, definitely expose that versus the API. That was one of the things when we were checking, it’s like, wait, the API, you know, all this turmoil, and yet the API was still up and running, it was still working.

And in some cases, depending on how the APIs have been built by those banks, it may still be a little bit in arrears where they’re passing it prior to information or whatever. But there’s some APIs now that are getting designed really well that we know that are passing data in real time and data is still flowing through, and it’s not dependent on maybe people being there on the wire desk.

Joseph Drambarean (22:50):

So what do we do from here? I mean, it happened. We breathed a huge sigh of relief on Sunday when we saw.

Brett Turner (22:59):

Not the only one.

Joseph Drambarean (23:00):

We’re not the only ones. And I think what happened when we went back to work on Monday, it was, this happened, it’s real, and it’s playing out now. We were watching the news carefully just from an operational perspective, for any other issues and interruption of service that we might see. We ended up launching a connection status page just because we felt like if since we’re monitoring it anyways internally, we might as well make this available to our customers because they probably want to know themselves, what’s the exposure. And so we’ve been keeping an eye on that. And over the week, interesting things have played out. The Credit Suisse scenario that’s also unfolding right now. First Republic Bank was another one we’ve been watching very carefully, but at the end of the day, it just brought into very crisp, clear attention, the fact that never before the multi-bank topic is now front and center. And it’s, as we discussed so far, it’s not just about diversification. That’s just, at the most academic level, it’s the most obvious thing that you could say, right? Don’t keep all of your eggs in one basket.

Easy for anyone to say. But then what you have to realize very quickly is you take that step. So now what? You still need visibility, you still need to be able to operate, you still need to have a backup. So that’s why I felt like more than ever before, this was a big moment for Trovata because have you ever had an experience over the last, we’ve been at it for six years together. Is it seven? Six or seven. Whatever it is now. I don’t know why I’m blanking on that. Point is for a very long time, has there ever been a moment like this one where the mission, the why we exist, the passion of, we feel like we’re changing the world for a reason, it really came into the limelight over this week. The stories that we’ve been told just by our customers this week, the fact that we were there, the fact that we continue to support.

Brett Turner (25:12):

And the whole point of a lot of we’re just, it’s really hard to be an active manager of your cash. And usually, okay, that’s just the experts. Treasury teams, really large companies. Maybe that’s the difference of, “Hey, I’m not a trader on Wall Street.” I don’t have the time or the resources or the acumen or the knowledge or whatever. I’m a business person, so I’m just going to leave my funds just sitting passively. If you’re going to invest, be the equivalent of like, Hey, I’m just going to invest it in all in maybe a three-year CD, and then I know it’s going to be there. It’s there when I need it, or you’re just not going to look at it or do things with it. But you can’t do that and you don’t want to do that. You just don’t have the resources to do it. Right.

And I think that’s the big message. We’re giving you best practice in a box. Trovata is. The whole notion of it’s not just also managing your cash, which cash management sounds like a boring topic. It’s not so boring right now, and that’s pretty cool. But we’re trying to make this really, really easy for everybody to sort of be an active finance, treasury rockstar where you can manage this stuff so much easier because we’ve built a platform to enable and automate and multi-bank is a possibility. You don’t have, you look at the bank portals are there and they serve a purpose, but there’s so much more intelligence, all of the analytics as a business intelligence tool to really utilize. And then on top of that, much more responsive and automated and active in terms of moving money and all these things. So there are these large treasury tools, but these things are 25 to 45 years old and they’re not really suitable for most businesses.

And so the gap is massive. It’s definitely exposed here now. It needs to be multi-bank. How do you really get best practice and could actually manage this and raise your game in a lot of ways to do things that just you couldn’t do otherwise? It’s sort of like you’re using robotics to help you do all that, and now you can. And I think those are the things that we truly want to get the message out. We truly want to help companies because yeah, I mean, it sucks to be caught flatfooted. And then you feel the aspects of, “Hey, maybe I let my company down a little bit.” Or even you’re challenging yourself. I mean, there’s moments that I, like when I first started my career at Deloitte as an auditor, I audited financial institutions and I’ve got a lot of background and working at Amazon, managing their SEC report, balance sheets and financial statements and financial reporting, gap reporting is very much a part of my early DNA. And so it’s like, yeah, maybe I probably should have looked at SVB’s audited financials from last year.

And so there’s some of those things. So at the end of the day, there’s everybody, it’s hit everybody somehow some way. But the bigger thing now is how do we move forward and there are better ways and everybody’s going to move forward and be changed because of this for sure.

Joseph Drambarean (28:15):

So what have we done? First of all, thank you for being so vulnerable on the podcast today. I think it’s an important story and I felt like it was relevant and we’ve been talking about it all week and we just have a slice of the story, if you will, of everything that played out. We didn’t want to leave our audience without any resources. So over the course of this week, we’ve launched quite a few resources. Articles that provide kind of a guidepost of best practices with regards to multi-bank, with regards to liquidity management, cash management, specifically within that topic, forecasting. We also have the product which we are rolling out on a freemium basis. So if you haven’t signed up for Trovata, you can take advantage of an offer to connect one free bank today and get on what we consider on an amazing kind of first time basis where you will have access to that visibility into those balances.

You can do research from an analytics perspective. You can look into your transactions and see the activity and truly available for free with regards to that first bank connection. And we just encourage everybody to take advantage of these resources because this topic is so top of mind right now. It’s so relevant, and we feel like the package of resources, whether it’s best practices, whether it’s the product or whether it’s insights, we’d be happy to talk to you directly actually as well. So take advantage of that if you haven’t. And yeah, this has been an interesting pod.

Brett Turner (29:48):

Well, we’ve made now something so easy because it truly is, and banks are investors in us. JP Morgan, Wells Fargo, Capital One, NAB, are all investors in us and we’re innovating in this and they want this innovation. That’s the other thing is, well, is that against the banks because it’s pulling away maybe from what they have? And it’s like, no, they’re investing in us and they’ve come together to really promote this. And you see what’s even happening now, some of the banks are kind of rallying. I know that’s kind of debate on whether why of that’s happening, but at the end of the day, there truly is this aspect of we’re not nationalizing the banking system. At least that’s not the intention. And maybe it feels a little bit like that now, unfortunately. But I think the aspect of multi-bank and the bank portal has a purpose, but multi-bank, and being able to have a little more control of your data, of all your analytics, of all those things, more as a tech product, you really need that.

And nobody wants to do that in Excel. So the barrier to get this online banking, except it’s bank agnostic, it’s multi-bank across whatever, it’s sort of a BYOB, bring your own bank. You get that, and we’re offering that for free to get core basics. Kind of like online banking comes free with your own bank, but you get all these other things. And yeah, of course, we have to make some money, so we’ve got some additional, a lot of other features, a ton of other features that you can opt in as premium services, of course. But just even those basics to get going and signed up and say, and when you get those training wheels going, yeah, it makes it easy. It’s easy to step in, it’s easy to access. Everybody should access that because of the low barrier that we’ve made.

Joseph Drambarean (31:38):

Well, I think this has been an amazing Fintech Corner episode. Excited to be doing this in studio and here in our office. Yeah, until next time. Thank you. Yeah.

Brett Turner (31:51):

Thanks.