Natural Products Expo West started as a great experience for plant-based honey manufacturer MeliBio.
The company, which started in 2020, introduced its Mellody brand 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 people at his booth and noticed his phone kept ringing. He tried to stay focused on talking about his company to interested potential clients, analysts, investors and other visitors. But he finally stopped talking to look at his phone.
“From three different investors, I got text messages that were going around,” he said. “‘Have you seen the news?’ ‘Are they exposed to SVB?’ ‘Darko, you may have to react to this.’
“And I was like, ‘What’s going on?’” Mandich continued. “Then I checked the news and I was really surprised.”
The news was about Silicon Valley Bank, which owned about 90% of MeliBio’s funds, rapidly losing value. The bank, which mainly served technology companies and startups, announced the day before that it lost nearly $2 billion on its sale of US Treasury bonds and mortgage-backed securities. On Thursday, the bank searched for a buyer after a failed attempt to raise capital.
On Friday, regulators shut down SVB, as the California-based bank was commonly known. A silent panic began to take over the atmosphere at Expo West.
“I think this was all corporate life on a grand scale, kind of compressed into two or three days, where the roller coaster of emotions went up and down like Six Flags,” Mandich said.
Monica Bhatia, CEO and founder of Equii, which uses specially fermented grains to make high-protein flours for CPG products, was at Expo West showing off the company’s bread. All Equii funds were with SVB.
“I think the word is panic,” he said. “We were in a panic. We saw other founders panicking too, for the right reasons.”
The panic abated somewhat on Sunday, when federal regulators announced they were taking emergency action to win back all of the bank’s depositors.
On Monday, President Biden said that customers who held deposits at SVB and Signature Bank, which were shut down by regulators on Sunday, “can be confident that they will be protected and have access to their money starting today.”
Although the two founders of the company breathe 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 been through difficulties in life, I probably don’t experience the magnitude of the stress yet. [I probably will] after the mind calms down.”
Fighting 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 that MeliBio had in SVB had to be transferred there.
“I knew we have a little bit of funds in other banks to cover immediate payroll,” Mandich said, “but I was very stressed.”
On Thursday, Mandich accessed a computer around 3:00 pm Pacific time, which was still during SVB’s business hours. But when he tried to log in to the bank, both his username and his 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 from the SVB account around 6:15 p.m.
On Friday morning, Mandich woke up to more frantic emails and text messages telling him that SVB had closed.
“I probably have 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 I needed to figure out how to meet payroll on March 15. And then, Bhatia said, he needed to figure out how to survive, first for the rest of March and then for the next few months.
Bhatia and her team began to crunch the numbers quickly. They examined each strategy along with the things that were most pressing for the company.
“The way we thought internally was, OK, what’s the worst-case strategy and then the best-case strategy,” Bhatia said.
Flashbacks of financial turmoil and moving on
For MeliBio’s Mandich, the whole experience took him back to his early years in the former Yugoslavia.
Before coming to the US, he lived through civil wars in the Balkan nation and all the economic turmoil that comes with that conflict, including bank runs and hyperinflation.
“My PTSD kicked in,” Mandich said. “I was frozen, but I still had to keep my emotions alive. I had to be there for the team. I had to go to them.”
Mandich went to a co-working space instead of working from home to be around people. There he learned that federal regulators had taken over SVB and that none of MeliBio’s money would be lost. He toasted the news with a vegan blueberry muffin.
Many founders of food tech companies, Equii’s Bhatia said, tend to come from science, technology or operations backgrounds. They are usually not business operations savvy first, although the SVB experience has had the effect of making them much more financially astute.
Mandich said that this type of situation forces entrepreneurs to delve into some details of the business that are important, but that do not generate customers or sales, and do not add value to the company.
Commercial details also do not contribute to MeliBio’s mission to save the bees.
“To save the bees, we actually have to replace bee-made honey with our own honey, and opening new accounts and reading the 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 a kind of fiduciary responsibility. I will have to figure out how to make sure I prioritize building the company, while keeping our company assets protected.”