On Thursday, March 9, Don Muir, Co-Founder and CEO of Arc, got an inkling that the SVB failure would be significant.
As stocks of the bank started to plummet, companies turned to fintech, desperately trying to find alternatives.
“We were receiving a deluge of inbounds from startups rapidly trying to open bank accounts,” he said. “That’s when we realized there’s something going on here.”
He explained that the company, also based in Silicon Valley, then worked throughout the weekend assisting affected institutions. First with their Treasury deposit product and then, as founders’ concerns turned to payroll, their funding solutions.
“It was customer driven. It was push, not pull. And companies were coming to our because we have a technology-driven onboarding experience. It’s a seamless, frictionless safe onboarding experience where we can do all our diligence through AI.”
Fintechs had led the response in those fear-filled days, he said, in response to the mounting panic, trying to calm the fears of depositors with cash tied up in the then-shuttered bank. However, Arc’s solution offered ease that offered all that founders sought in that critical time.
“Arc was the only fintech in the market with FDIC-backed bank accounts and embedded financing in those accounts,” he said. “What’s the implication? You can come to Arc for both diversifications of cash management so that you can diversify your bank deposits across our network of bank partners. And you can instantly tap into your future revenue stream to access upfront capital, our core product. All in one embedded app.”
Others seemed to recognize these benefits, leading Arc to increase their deposit volumes by 15x and receive over 500 applications for hundreds of millions of dollars in short- and long-term financing.
“During the SVB collapse, the team at Arc moved quickly to provide emergency financing for payroll and then helped set us up with products to protect our company cash going forward,” said George Khachatryange, Founder and CEO of Offerfit, a customer of Arc.
“They stepped in at a critical time to reassure us and provide quick and personalized service to help us keep our business running.”
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Challenging conditions lead to Arc Gold
Soon after, on March 15, the company launched its Arc Gold solution, offering automated treasury management for startups to diversify and strengthen their financial position.
“While this banking turmoil has obvious short-term impacts on startups, founders should expect
significant long-term obstacles to emerge, including a tougher fundraising environment and fewer debt providers,” said James Currier, General Partner at NFX. “Arc Gold gives startups critical tools to weather this storm, all of which will be helpful in the coming days and years.”
The product expands on Arc’s existing products, offering $2.75 million of FDIC coverage while automatically balancing startups’ money between cash accounts, Money Market Funds, and Treasury bills to earn up to 4.95% APY.
Muir explained that the company could achieve this level of diversification on one platform because they aren’t a bank, applying the digital-first approach of fintech with responsive service to the changing landscape.
“Founders shouldn’t have to worry if their bank will process payroll or if their funds are protected by FDIC coverage,” said Muir. “Their funds are protected by best-in-class FDIC coverage, dedicated support, and fully-customizable treasury management controls.”