Natural Products Expo West began as a great experience for plant-based honey maker MeliBio.
The company, which got its start in 2020, was introducing its Mellody branded honey — which won an award for being one of the best vegan products launched at the mega-trade show in Anaheim, California.
CEO and co-founder Darko Mandich was interacting with the people at his booth and noticed his phone kept buzzing. He tried to stay focused on talking up his company to interested potential customers, analysts, investors and other visitors. But he finally stopped talking to look at his phone.
“From three different investors, I received text messages that were going around,” he said. “‘Have you seen the news?’ ‘Are you guys exposed to SVB?’ ‘Darko, you might need to react on this.’”
“And I was like, ‘What's happening?’” Mandich continued. “Then I checked out the news, and I was really shocked.”
The news was about Silicon Valley Bank, which held about 90% of MeliBio’s funds, quickly losing value. The bank, which primarily catered to tech companies and startups, announced the day before that it lost nearly $2 billion in its sale of U.S. treasury bonds and mortgage-backed securities. On Thursday, the bank sought a buyer after an unsuccessful attempt to raise capital.
On Friday, regulators shut down SVB, as the California-based bank was known commonly. A quiet panic began to take over the atmosphere at Expo West.
“All of this was, I think, entrepreneurial life on a large scale, just kind of compressed within the two or three days, where the roller coaster of emotions was going up and down like Six Flags,” Mandich said.
Monica Bhatia, CEO and founder of Equii, which uses specially fermented grain to make high-protein flours for CPG products, was at Expo West showcasing the company’s bread. All of Equii’s funds were with SVB.
“I think the word is panic,” she said. “We were panicking. We saw some other founders who were panicking as well, for the right reasons.”
The panic subsided a bit on Sunday, when federal regulators announced they were undertaking emergency measures to make all of the bank’s depositors whole.
On Monday, President Biden said that customers who had deposits at SVB and Signature Bank, which regulators shut down Sunday, “can rest assured they’ll be protected, and they’ll have access to their money as of today.”
While the two company founders are breathing a little easier, the stress is still there.
Mandich, who grew up in the former Yugoslavia, couldn’t easily say how he felt on Monday afternoon. “My answer is, I don't know,” he said. “Because I think with difficult things like this, at least for me as someone who has gone through hardship in life, I’m probably yet to experience the magnitude of the stress. [I probably will] after the mind calms down.”
Scrambling to figure out what’s next
When Mandich saw what was happening with SVB, he realized that MeliBio needed to act. The company has another bank account, and the millions MeliBio had at SVB needed to be transferred there.
“I knew that we have a little bit of funds in other banks to cover the immediate payroll,” Mandich said, “but I was super stressed out.”
On Thursday, Mandich got onto a computer around 3 p.m. Pacific Time, which was still during SVB’s operating hours. But as he tried to log into the bank, both his user name and password were denied.
Apparently, Mandich said, SVB’s system had undergone a platform change, and he had to reset his login information. After a few frustrating hours, he initiated a wire transfer of the SVB account around 6:15 p.m.
On Friday morning, Mandich woke up to more frantic emails and texts telling him SVB had shut down.
“I'm probably yet to experience the magnitude of the stress. [I probably will] after the mind calms down.”
CEO and co-founder, MeliBio
As for Equii, the company needed to figure out how to meet payroll on March 15. And then, Bhatia said, it needed to figure out how to survive — first for the rest of March and then for the next few months.
Bhatia and her team started to crunch the numbers quickly. They looked at every strategy along with the things that were most pressing for the company to do.
“The way we thought internally was, OK, what's the worst case strategy, and then the best case strategy,” Bhatia said.
Financial turmoil flashbacks and moving forward
For MeliBio’s Mandich, the entire experience brought him back to his earlier years in the former Yugoslavia.
Before coming to the U.S., he lived through civil wars in the Balkan nation and all of the economic turmoil that comes with such conflict — including runs on banks and hyper-inflation.
“My PTSD kicked in,” Mandich said. “I was frozen, but I still had to keep my emotions going. I had to be there for the team. I had to address them.”
Mandich went to a co-working space instead of working from home to be surrounded by people. There he learned federal regulators had taken over SVB and none of MeliBio’s money would be lost. He toasted the news with a vegan blueberry muffin.
Many food tech company founders, Equii’s Bhatia said, tend to come from the science, technology or operations realms. Generally, they aren’t savvy in business operations first — though the SVB experience has had the effect of making them much more financially astute.
Mandich said that this kind of situation forces entrepreneurs to get more into some business details that are important, but they don’t generate customers or sales, and they don’t add value to the company.
Business details also don’t further MeliBio’s mission to save bees.
“To save the bees, we actually have to replace bee-made honey with our honey, and opening new accounts and reading through FDIC rules is not saving the bees,” Mandich said. “So that’s something that worries me, and that's something that I have to do as kind of a fiduciary responsibility. I’ll have to figure out how to make sure that I prioritize building the company, while I’ll also keep our company's assets protected.”