48 Hours Till Payroll, $200,000 to Go: Diary of a Bank Failure
The collapse of Silicon Valley Bank set major financial disruptions in motion. It also made one founder’s week a scramble.
Sara Mauskopf’s day-to-day concerns — her customers, her employees, her own three children — don’t typically involve the Federal Deposit Insurance Corporation. She is the chief executive of Winnie, a start-up that helps families find child care and helps child care providers find customers, serving over 250,000 day cares and millions of families. Ms. Mauskopf, 38, has raised over $15 million for Winnie since its founding in 2016 and employs 29 people. All of her company’s money was in Silicon Valley Bank.
So when the bank collapsed last Friday, it suddenly became very important to Ms. Mauskopf what the F.D.I.C. did. Her company joined nearly half the venture capital-backed technology and science start-ups in the United States, which banked with SVB, worrying over whether they would have access to their money and be able to pay their employees. In the days since, Ms. Mauskopf has been cautiously watching how the bank’s failure might affect the economy — and rethinking where her company will keep its money going forward.
To explain what it felt like in real time to be a customer of the second biggest now-failed bank in U.S. history, Ms. Mauskopf gave The New York Times a rundown of the hour-to-hour changes, and her scramble to try to raise $200,000 for payroll in two days. It is stressful to keep a business running while your own bank’s failure is upending the tech industry. Her account has been edited and condensed for space and clarity.
Thursday, March 9
I woke up at my usual time and started my day with no knowledge that anything was going on with SVB whatsoever. I don’t pay attention to bank C.E.O.s’ statements. I had no idea that there was anything to even pay attention to. I had a meeting and had to drive 40 minutes to San Francisco, so I was getting in the car to go to that when I saw an email from one of our investors saying, there’s going to be a run on SVB and people are getting their money out.
I wanted to assess: Is this an emergency, like, drop everything? Or is this like, “I can wait and continue about my day?” That’s when I contacted other founders through groups I’m in on Slack and WhatsApp. I emailed back the investor who had told me about this. The consensus was that since our money in SVB is in what’s called a cash sweep account — basically, an account where cash is swept into a fund with more interest but low risk — it was safe.
If anything were to happen to our deposits, it was insured. I checked with our lawyers, who told me we could not pull money out of SVB without violating the terms of our venture debt agreement (a loan for early-stage, high-growth companies). I didn’t want to void that agreement because you lose the venture debt line.
A number of people in founder group chats said they were leaving their money in SVB, and a number of people said they had wired theirs out. That’s when I decided to wire some funds to a different account.
I emailed my personal bankers when I was driving in the car. I pulled over and I wrote to them: “Hi folks, hoping one of you might be able to point me in the right direction. I’m hoping to move a portion of Winnie’s corporate banking.”
I knew the fastest way to get a corporate account would be with a bank who already had me as a personal account. I knew a lot of other founders had wired money into their personal accounts, which is something I didn’t feel comfortable doing. I wanted to have a corporate account set up before I wired money out. But by the time I got it set up, I was told the wire wouldn’t be transferred until first thing Friday morning.
Friday, March 10
I didn’t sleep all Thursday night. I started texting with investors and they were telling me that people had actually gone to SVB branches to get cashier’s checks. I was like, “Wow, everyone got out except for me because I was doing my due diligence.” I am usually the fastest mover in a situation, but one of my resolutions has been to take more time to digest things before I react. I took all of two hours to digest, and it was too late. I missed the bank run.
I woke up on Friday, threw on clothes and got to the SVB branch in Palo Alto at 8:45. It was supposed to open at 9 a.m. or 9:30. I drove to the branch where I knew another founder had gotten a cashier’s check. There were already Federal Deposit Insurance Corporation notices posted to the bank door saying it was closed.
There were a few other people there super early, and it was raining, and we were all walking back to our cars looking sad. The other people there were also super nerdy looking and I was like, “Yup, those are founders.” The four of us who were there didn’t talk because I was not in conversation mode.
I looked at payroll. The transfer from the SVB account to the payroll provider, around $200,000, was supposed to happen Monday. I called Gusto, our payroll provider, and I asked: “Is this transfer going to work on Monday?” They were like, “Yeah, it’ll work, I don’t know what you’re talking about!”
Later on Friday, they sent a notice along the lines of: “Actually it won’t work, if your account was connected to SVB you better wire us the money you need for payroll.” That was really when I started realizing I needed to come up with this money.
I scheduled a call with our employment attorney for Saturday because I wanted to understand — could we miss payroll? I knew it would hurt my employees, but what do you actually do if you miss payroll? It turns out you can’t miss payroll, especially not in the state of California.
I got on a Zoom call with my co-founder and our operations lead to discuss the full situation and all the things going wrong. Our credit card was with SVB and I knew those charges were going to start failing. I was like, “We’re going to have to move credit cards for all of these services.” I took a quick average — Amazon Web Services, software like Slack and Notion, Google — and I realized it was probably not going to be more than $10,000 on a given day for charges that come in.
It was not until Friday night or Saturday morning that stuff started failing on the credit card. We moved the charges to Brex. Then they got blocked on Brex. That’s when I started moving them to my personal cards. My husband is also an employee of Winnie. I said: “Hey, Eric, I’m going to be putting all these charges on our credit card. Don’t charge anything else. And by the way how much money is in our checking account? Because I might need to withdraw all of that to put toward our payroll.”
I got on Slack to update my team: “We don’t have access to any of our funds at the moment. While our money is ‘safe’ it is not accessible to withdraw. We expect to get access to some funds on Monday, which is important because that’s when payroll tries to withdraw money from our account to pay y’all. We hope to not experience any delays and will keep everyone posted!”
Saturday, March 11
My co-founder was on Slack with me the whole weekend. I kind of felt like I was running mission control and I had to communicate with a bunch of different parties. It was sometimes hard to triage. Who did I have to communicate with and who was just trying to be helpful?
I had to keep telling myself: “I cannot access my bank account. I need to do what I have to do to secure funds for Monday.” It was almost as if I was raising venture capital. A fund-raise process, when you’re raising venture capital, can take six to nine months. I was looking to get money in 24 hours. It was intense.
I sent an email to all my investors with the subject line “Winnie urgent cash needs due to SVB.” The email opened: “Hi investors! Thank you for all the advice from our board and others. As I’m sure you are well aware, the F.D.I.C. closed SVB on Friday. We were not prepared for this to happen. I wanted to provide an update on how Winnie is doing right now.”
I told them the situation and I told them how much money we were looking for by Monday. It was under $200,000 to make payroll, but two weeks later we had another payroll looming. That produced a lot of leads. Some people tried to help directly. Other people pointed me to funders and loan options.
I started a spreadsheet and wrote every name down. There was everything out there — people who were going to put money on a convertible note with no prepayment penalties, people looking to charge high interest rates, people who were looking to basically sell your deposits at SVB for a discount. It was kind of hard to know, is this predatory? I was trying to stack rank everything. My investors were my first choice. Then there were my friends who were saying, “Yeah I’ll loan you money on an I.O.U., but I don’t have that much money.” I was cataloging those options.
At one point my husband brought me the leftover cheese quesadillas that my kids hadn’t eaten, which were cold and probably disgusting with their germs and snot, and I scarfed them down like they were the best thing I’d ever tasted. I got notifications from my watch that I wasn’t standing. I was like, “Yeah I’m definitely not standing.”
It was the big annual gala for my kids’ preschool. My husband had been working all school year to plan it. It’s the one event we go to. My mother-in-law came in, she came to say hi to me and I was like, “can’t talk.” I showed up at the gala for an hour. I got there and my investor was calling me, and I was thinking, “This is silly, I can’t even function here.” I was wondering, “Should I have a drink?” I had a sip and thought: “This is a really bad idea.”
I had some food and went home. I was in the process of opening another bank account. The banker who was setting me up with an online portal had to call me. There were also rumors saying that I would have to file an F.D.I.C. claim; investors at that point were sending updates to their portfolio companies on actions you should be taking.
You had to create a login on this government website. They had this whole process to verify your identity where you had to hold up your driver’s license in this very certain way. That took a long time. Then you got into the actual claim filing and all you had to do was write your name and the name of the account. I thought: “This will never work. What is this thing I just filed?”
There were all these rumors in the back channels that you should upload bank statements, but we didn’t have access to our bank statements because they were in the SVB portal that was down. I went to bed late and woke up panicked multiple times throughout the night.
Sunday, March 12
I told employees, on Slack, that we were doing everything in our power to make payroll, but there was a chance it might be late. I told them to come to me if that was going to be a real hardship. My employees were so understanding. Some of them came to me proactively and said: “Skip my payroll so you can pay other people.”
We were getting closer to identifying our first and second choice loan options. The people that were loaning us money had to work out what vehicle they were going to do the loans on. We had documents going back and forth with our lawyers. I’m sure I racked up a ton of legal bills.
We reviewed different loan documents and we were finalizing the new bank account setup. I had to update everything that links to our bank account, including platforms like Stripe, which is where our revenue comes into (from child care providers), and I wanted to make sure that wasn’t going to the SVB account.
I was working through a loan document when the news came in that everyone was going to have access to their SVB accounts and be able to withdraw all their money. There was an F.D.I.C. joint statement that everyone started sharing immediately on Twitter: “Depositors will have access to all of their money starting Monday, March 13.”
That was the first breather I had. I did go see my kids and get something to eat. Then I realized I needed to thank people for all their help, including investors and everyone who sent me advice along the way.
I knew I would have to wake up really early on Monday to try and initiate the wire transfer out of SVB. I was trying to figure out how early. Did Monday morning mean midnight? That would be 9 p.m. Pacific on Sunday. I quickly figured out it wasn’t 9 p.m. We also got a new credit card from this company called Ramp, and I was able to move charges to the Ramp card.
Monday, March 13
I set so many alarms, the first being at 4 a.m. Pacific, which was 7 a.m. Eastern, because I didn’t want to be the last one out of SVB. I was able to log in at 6:30 a.m. Pacific. There were 10 different authentication steps to submit a wire transfer where it keeps asking for an additional security question or text message. At each of those steps there was a 90 percent chance of getting logged out because of traffic.
I submitted a wire transfer (for all the money in the account) at 8:30. Then I spent hours just refreshing the new bank’s online portal to see if the money was appearing. Wire transfers are the scariest thing to me. They disappear from one account before you see them in another account. I had never done a wire transfer this big. Normally I would have done a test transfer but I wanted to get it out.
We had to wait until the money was in our account to initiate the wire transfer to the payroll provider. Then I picked my daughter up from school because I felt like I needed to give my husband a little break. I told my daughter, who is 7½, that all the money was in a new bank account. She did the umpire “safe!” motion. I thought that was really cute. It’s amazing what kids understand.
Tuesday, March 14
There were tons of loose ends we had to plug up. We have a couple customers that pay us outside normal systems, through A.C.H. transfers, so we had to update all of our banking information with them.
My other daughter, who is 4, did show and tell at school on Tuesday morning and for her item she picked a piggy bank. She absorbed a lot of this drama, clearly.
Wednesday, March 15
There was a bad storm on Tuesday so I lost all power and internet. I took a really cold shower. Then I got in my car and headed to a co-working space. I had to get internet access. I had been ignoring my team. I needed to pay some attention to them and get back to work. There was also a lot to clean up for our new accounts. I needed to figure out the right allocation of funds in all the banking accounts I’ve set up.
There’s some talk of people keeping money with SVB. I received an email from them saying SVB is the safest bank, we will honor your venture debt if you come back. I have to digest that. I don’t ever want to hold all my money in one institution ever again.
Thursday, March 16
The power came back after the storm. I cleaned out my refrigerator and took a hot shower. We also have a big product launch coming up next week for summer camps. Now is the time when parents search for summer child care, and we’d hoped to launch the product this week but pushed it to next because of everything going on in the world. Certainly there was some context switching between, “I have no access to my bank,” “I have no access to power” and “OK, we’re back to business.”