April 2023

Why the SVB Downfall is a Lesson on Strategic Communications

The first quarter of 2023 was a whirlwind, but one particular event stands out from the rest. You guessed it – the collapse of Silicon Valley Bank (SVB). While the crisis itself required a Monday-morning quarterback, from a PR perspective, we thought a deep dive into the misguided communications response deserved its own commentary.

If you’re unfamiliar, SVB was the 16th largest US bank and funded nearly half of all VC-backed US 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 amidst inflation and slowdown in the tech sector. 

In an attempt to rescue their plummeting portfolio, SVB announced last month they had sold securities at a loss and were putting $2.25 billion in new shares up for sale. Their communications around the news pointed to an inability to read the room, a serious lack of context or reassurance for key stakeholders, and overall 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 Federal Deposit Insurance Corporation. Let’s break down the areas of their communications strategy that needed serious rethinking.

The Messaging

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. This lack of rationale made them appear as if they were withholding information, causing widespread concern and speculation across the channels and resources their customers most often rely on – Twitter, Reddit, and VC advisors.

All in all, the lack of clarity and rationale for their actions resulted in customers assuming the worst (as blatant omission of detail usually does). Even worse, 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 vocal concerns paired with delayed response times led to an industry-wide consensus that something was clearly very wrong.

The Audience

SVB also failed 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 (i.e. the VCs and businesses who effectively caused the bank run) in favor of the social media and Slack chatter offering real-time analysis and advice instead. 

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 couldn’t have relied on media outlets to temper speculation with nothing more than a convoluted press release that failed to address the elephant in the room.

Senior Communications Leadership

One of the biggest learnings for CEOs in 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 proved 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.

Intern Spotlight: Grayson Wolff

Tell us about yourself!

My name is Grayson Wolff, and I just celebrated my 21st birthday yesterday! I grew up in the small town of Erie, Colorado. Despite having grown up just minutes away from the Rocky Mountains, I’ve never been skiing or snowboarding — something I never live down. Right now, I am finishing my third year studying public relations and entrepreneurship at USC.

Why did you want to intern at JSA?

I met the JSA team about a year before I started in January. Throughout that time, the team took time out of their days to sit down with me to discuss PR, the future of the industry, and the things they’re tackling day-to-day. Their willingness to dedicate the time to invest in students like me made JSA stand out beyond any other agency.

What have you learned so far?

Throughout my time at JSA, I’ve learned the importance of having expertise in the field your clients are in and how important it is to build relationships along the way. It’s not just about knowing how to write a great press release or pitch a story; it’s about understanding the nuances of the industry and having the connections to get your clients the coverage they need.

What do you want to do post-grad?

After graduation, I’d like to continue my career at a PR agency.

Honorary Shoutout: Hudson René Lawrence

The newest member of JSA got to go home from the NICU in March! Hudson was born on February 13, and has easily claimed the title of the cutest member of our team! Congrats again, Cassie and Dustin!  

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Thank You:

Thanks for reading JSA+Partners Monthly Digest! Please don’t hesitate to reach out with any questions, comments, or feedback. See you next month!