The Oscar for Making Payroll Goes to…..

Posted March 21st, 2023 by Aoife Brennan, in From The Trenches

By Aoife Brennan, CEO of Synlogic, as part of the From The Trenches feature of LifeSciVC

It was the last thing our finance team needed; a vague email from the CEO on a Thursday afternoon.  They were working on the K, prepping for a board meeting, and completing the upcoming payroll.

‘Hey guys, how much money do we hold at SVB?’

Response: ‘varies’

‘need exact numbers- how much is in each account? Suspect there could be a run about to happen’

So began an intense few hours of emails, text messages and calls.

We had been careful with our capital management; we had a sweep account that moved any funds above a threshold to a money market account (outside SVB) each evening and our long-term assets were invested elsewhere. Our exposure was low if the worst were to happen.

We read as much as we could about the SVB situation and understood that, while they were under some pressure, they had enough assets to cover all deposits, just not all at once.

We faced a prisoner’s dilemma- a situation wherein individuals acting in their own best interest do not achieve the optimal outcome for the overall group. The optimal, least disruptive outcome in this situation would be achieved by avoiding a run on SVB. The question that Thursday was- what were others doing?

Weighing heavily was our upcoming payroll- our transfer was due to occur on Monday and it was larger than usual as we planned to pay out bonuses to recognize the work of our colleagues in 2022. I was also checking in on various chat groups and on social media and could sense the rising panic- it was like SVB was everything, everywhere all at once.

While we had missed the deadline for Thursday, we issued a transfer request to move cash to cover payroll that evening, hoping it would be executed on Friday morning, a few days early but ‘better to be safe than sorry’. There was no parallel universe where we could observe the consequences of making a different decision.

The reality was the run was well underway by Thursday afternoon and no transfer requests after 4pm Thursday would be processed. On Friday morning, our transfer request remained ‘in progress’ and mid-morning, we realized that it would be stalled in limbo for an indeterminate duration.

The internal team huddled on a call on Friday morning and we each shared what we learned from the external groups we were in discussions with. The overarching theme was ‘can this really be happening?’ SVB had been such a great partner to us and was a hub of our business operations- they provided our corporate credit cards and all payments flowed through our checking account with them. Having that hub collapse overnight was unfathomable.

Our external legal advisors were fantastic and were feeding us information as it became available. In addition to our determination to reassure our colleagues that they would be paid, the legal implications of potentially missing payroll made it an area of keen focus for us. Luckily, we had sufficient cash available in one of our long-term investment accounts.

BUT having the cash available outside of SVB and getting it transferred were two different things as all service providers were inundated with calls and transfer requests. Our CFO described it as having water but needing to re-direct the plumbing and all the plumbers were busy dealing with the same issues across thousands of companies.

Another challenge was thinking through how we would access the money in our sweep account- while it was off the SVB balance sheet, it was tethered to our SVB checking account so accessing that cash was going to be difficult.

Saturday and Sunday were a bit of a blur- my kids got an impromptu lesson in the economics of running a bank as I spoke on the phone while shuttling them to their activities. I am happy to report that they found it all incredibly boring. For me it was surprising that even after all the COVID-imposed work from home, weekend crisis zoom calls still hold a strange kind of intimacy.

As I started to read stories and hear from other CEOs, I became aware of how relatively fortunate we were– many other companies and founders were facing a far more challenging situation. On Sunday there were rumors that Treasury and the FDIC would step in to guarantee all deposits but until that announcement was made, we needed to prepare to communicate with investors on Monday morning before the open. We were presenting at an investor conference Monday afternoon and needed to have our facts straight.

Despite the joint announcement from Treasury, the Fed and FDIC on Sunday evening (which was a huge relief) the challenge of transferring money to cover payroll was not over. Everyone else was trying to do the exact same thing on Monday morning as soon as SVB opened for business again. It would be late Tuesday evening before we could confirm to employees that payroll would indeed be executed the following day, on schedule.

Biotech is an industry where the science is the star of the show; the usual cause for drama and excitement. The past few days the spotlight turned on our supporting actors- the finance departments. They are the ones who have been efficiently closing each quarter, managing our accounts and keeping the lights on.  Turns out they have been quietly preparing to take the leading role and now the Oscar goes to them for helping our companies navigate through this difficult time.




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