Founder and CEO of JSA+Partners, a strategic communications firm working with consumer tech, digital media and gaming companies.
In the first quarter alone, 2023 ushered in a dizzying number of PR crises, from airline meltdowns to widespread uproar and confusion over a potential TikTok ban. However, one particular crisis stands out from the rest: the collapse of Silicon Valley Bank (SVB). This is due not only to the gravity of the situation itself, but also the misguided communications response that swiftly expedited the downfall.
To those unfamiliar, SVB was the 16th largest U.S. bank and funded nearly half of all VC-backed, U.S. start-ups and life science companies. Thanks to the pandemic-fueled boom in digital services and low borrowing costs, their assets more than tripled from 2019 to 2023, and the bank opted for low-risk government bonds to invest client funds, a strategy that backfired in recent months due to hiked interest rates that occurred amidst inflation and slowdown in the tech sector.
In an attempt to rescue their plummeting portfolio, SVB announced they had sold securities at a loss and were putting $2.25 billion in new shares up for sale. As outlined recently by Forbes contributor Edward Segal, SVB’s communications around the news demonstrated not only a troubling inability to read the room and serious lack of context or reassurance for key stakeholders—but also subpar delivery.
The consequences of this poorly executed communications strategy caused sheer panic amongst customers, which led to a run on the bank, a 60% drop in stock value, an intervention by California regulators and finally, liquidation of assets by the FDIC.
Let’s break down some strategic areas in which leaders can learn from this by applying these three lessons to enhance their communications strategy.
1. Transparency in your messaging is crucial.
A major precipitating factor for the bank run: the messaging deployed by SVB focused heavily on the numbers, while failing to contextualize the situation in a way that offered any form of reassurance to stakeholders. Two days prior to the collapse, the bank issued a press release announcing their cap raise that gave zero insight into why they were conducting the raise at all.
The lack of rationale made them appear as if they were withholding information, causing widespread concern across the channels and resources their customers most often rely on—Twitter, Reddit and VC advisors.
The lack of clarity or rationale for their actions also ended—as conspicuous omissions of detail usually do—with customers assuming the worst. Added to this, SVB stayed quiet during the height of the panic and speculation, only replying with a disconcerting “stay calm” after VCs began to spread the alarm by urging their portfolio companies to avoid SVB or withdraw funds altogether.
The vague messaging that failed to address voiced concerns paired with delayed response times led to an industry-wide consensus that something was clearly very wrong. All leaders can learn to better grapple with the need for transparency among an increasingly informed investor and consumer base.
2. Know your audience.
Betraying another major blind spot in their communications strategy was SVB’s failure to consider their target audience—and the proper channels through which to reach them. In addition to their press release, SVB filed a form 8-K with the SEC, a required action in disclosing major events with investors.
While this offered more clarity than the press release, these filings were overlooked by the constituents who mattered the most—that is, the VCs and businesses who effectively caused the bank run—who themselves turned to social media and Slack chatter in order to gain real-time analysis and advice.
It’s no secret that the 24-hour news cycle no longer relies on traditional distribution channels, and SVB could have helped mitigate concerns by meeting their customers on the channels where they already are. Without a formal statement, press conference or engagement via social channels, SVB certainly wouldn’t have found themselves reliant upon media outlets to temper speculation with nothing more than a convoluted press release that failed to address the elephant in the room.
3. Timing is everything.
Adding insult to injury, the timing of the raise announcement and SEC filing only worsened any chance of avoiding a panic. The same day SVB made their announcement, crypto bank Silvergate also announced its shutdown.
Bank instability was already fresh in the minds of many of the same key constituents and stakeholders with ties to SVB. This inopportune timing lumped SVB into a broader conversation around financial instability and uncertainty across the board.
Overall, the rapid progression of the SVB collapse proves that a thorough and nuanced communications strategy can play a vital role in a company’s ability to prevent catastrophe in the first place, as well as mitigating the damage—and buying time—amidst a crisis.
Senior communications leaders have much to learn from recent events.
One of the biggest learnings for CEOs the last few years is the importance of both internal and external communications and how those need to align. It’s never been more important to have senior communications leaders at the board and executive levels to help steer the strategy. If nothing else, this latest crisis again shows that without the right communication, there can be catastrophic consequences.
In this case, could a better strategy and messaging have saved SVB from its demise? Potentially.
But could it have prevented widespread stakeholder panic and given the bank’s damage control efforts a fighting chance? Absolutely.
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