Don Butler became a prolific backer of Silicon Valley startups over the past two decades managing part of the multibillion dollar fortune for the dynasty behind Thomson Reuters Corp.

While those years brought a number of challenges — including the dot-com bubble burst, global financial crisis and Covid pandemic — SVB Financial Group’s collapse posed one of its biggest tests yet: How would Butler and his team support their investments when the firms’ lender of choice was no longer able to help? 

Now, as Butler starts a new era for the venture-capital arm of Peter Thomson’s family office, the former Lehman Brothers analyst is hopeful First Citizens BancShares Inc.'s takeover of the California lender will help it continue to play a vital role in the startup ecosystem. His firm kept its accounts with SVB after its collapse and encouraged its portfolio companies to do the same.

Also read: First Citizens to Buy SVB After Biggest Failure Since 2008

“This could open the door to a much stronger bank that is also less dependent on the tech sector alone,” Butler, Thomvest Ventures’ managing director, said from San Francisco. That could happen by combining the expertise of SVB’s relationship bankers with First Citizens’ diversified deposit base and better investment management, he added.— Thomvest Ventures (@thomvest) March 14, 2023

Butler, 54, manages about $500 million of Thomson’s fortune, part of a $64 billion dynasty now spanning at least three generations, according to the Bloomberg Billionaires Index.

Thomvest Ventures has made more than 80 investments in areas including finance, cybersecurity and marketing for the 57-year-old billionaire since its creation in 1996. Earlier this year, it allocated funds to Traction Complete, a data-enrichment platform based in Thomson’s native Canada.

Also read: Scion of $63 Billion Media Fortune Revamps Wealth With Tech Bets

Butler spoke with Bloomberg News in a Zoom interview following SVB’s collapse about his response to the lender’s failure and opportunities ahead. Comments have been edited and condensed for clarity.

Bloomberg LP, the parent of Bloomberg News, competes with Thomson Reuters in providing news and services.

How did you initially react to the SVB crisis?

Our first sign of alert came from a post to an online network of chief financial officers we belong to on the morning of March 9, indicating surprise and concern on the SVB news. We hoped the concern would calm, but by early afternoon we began to see more signals of a genuine bank run.

We then shared our thoughts with the CFOs of our portfolio companies to say that, while SVB is a trusted partner, this felt like a bank run was indeed happening.

We suggested they follow three actions: 1) move funds at SVB into off-balance sheet investments, such as money-market products the bank offered; 2) consider moving funds above their operational needs to other banks; and 3) begin the bank account opening process with another if they didn’t have other options already.
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And then what happened?

By early Friday, we began working on how to manage this situation across our entire portfolio and built out a table with all our portfolio companies mapping out their relationships with SVB.

The weekend ahead presented a unique challenge: The following Tuesday – March 14 — was a day when payroll processing providers for many of our companies would be deducting funds from their bank accounts. That meant they needed operating accounts up and running with enough cash.

Out of the roughly 30 companies we are on the board of or otherwise deeply engaged with, the vast majority worked with SVB. When we narrowed it down, those who thought they might need help meeting payroll needs totaled eight, mostly smaller companies that banked only with SVB.

A lot of our co-investors had their own operating capital tied up at SVB, meaning many were unable to help even if they wanted to. Our structure, investing for just one individual, meant we were able to move quickly and work with our team in Toronto to decide on a path forward in 30 minutes.

Our efforts continued until Sunday midday, when authorities stepped in to guarantee SVB deposits. We also reached out to a few friends in SVB leadership roles, suggesting we have a joint statement from VCs about the importance of SVB to the broader ecosystem. We ultimately became part of the group of over 650 firms signing a statement of support organized by General Catalyst.

How does this banking crisis compare to the last one?

This doesn’t feel anything like 2008, but the near-term impact is the cost of credit going up.

It also forced many investors in pre-seed and early-stage companies to rank their portfolio and decide who they wanted to keep alive and who they were willing to let go. There’s probably a class of companies that are much worse off because of this event — because it drove that investor psychology. I think you’ll see that in the form of bankruptcy filings over the next two quarters.

The way you manage your account is also going to change if you are a company or a wealthy individual. There’s far more awareness of the $250,000 deposit insurance coverage. Smaller banks may find more ways to deeply integrate with customers and businesses to avoid flighty deposits.

Where do you see opportunities?

Treasury management software companies is an area that is going to grow because of this situation. Our firm is still active in investment discussions across a number of businesses in that area and tools for CFOs. This is the time to get the best investments and terms. The right thing is to be courageous when others are fearful. There’s still plenty of work to do. We’re still keeping our foot on the gas.

How will you remember this episode?

One image that remains with me is from a Zoom call early Saturday morning [March 11] with our internal team. The team was fully assembled, even though I was on the road traveling and others were mid-flight, dialing in from a vacation overseas or from a hospital room recovering. That epitomized the “all hands-on deck” nature of this crisis and shows for me what crisis management looks like in real life.

If we don't have SVB, there's a huge hole. I think people underappreciate the role they played in the history they've had in the development of the Valley.

This article was provided by Bloomberg News.