Navigating turbulent waters: The rise of Arc in the aftermath of Silicon Valley Bank's collapse

In this episode of Sit Down Startup, get to know Donald Muir, the creator and driving force behind Arc, a digital bank crafted for the tech-savvy crowd. Muir, along with his co-founders Nick Lombardo and Raven Jiang, started Arc while they were attending Stanford Business School. Within two years of launching their business, the tech landscape was shaken when Silicon Valley Bank collapsed.

Join us in this episode as Muir shares his insights on navigating the aftermath of SVB’s collapse, the importance of teamwork in revolutionizing online banking, his perspectives on fostering cross-departmental collaboration, and the significance of an execution-driven mindset.

The aftermath of the explosion: How Arc rose to the occasion

On March 8, 2023, Silicon Valley Bank (SVB) announced the need to raise $2.25 billion in equity to bridge the gap caused by the fire sale of its long-term bond portfolio, which resulted in a staggering $1.8 billion loss. Unfortunately, this caused the market to panic, leading to the collapse of SVB that very night.

The next morning, Muir was inundated with phone calls from anxious founders who had accounts with SVB. The Arc founder understood the gravity of the situation. He says, “Not only were they operating in a challenging fundraising environment and a depressed tech environment where it’s harder to make sales and harder to grow revenue, but they also don’t know when their next funding round is going to occur or where it’s going to come from. Now, they have to worry about their existing cash—now even more precious in this environment—potentially being lost.”

Muir and his team had to act fast to make sure Arc could keep these startups afloat while SVB went under. They devised marketing collateral and streamlined the onboarding process, enabling Arc to establish FDIC-insured accounts for these startups within 10 minutes. Arc played a pivotal role in helping founders withdraw cash from SVB, diversifying their holdings, securing their deposits, and ensuring they could meet payroll commitments in the following week. Reflecting on this tumultuous period, Muir described it as “the most intense 72 hours of my professional career.”

When Muir received those panicked calls from founders, his team was willing to do whatever it took for Arc to accommodate these new clients. Employees even assumed temporary new roles within the startup.

He recalls, “The team went into overdrive. We set up new [job descriptions] for everyone outside the engineering team. Everyone from our office manager to our head of talent to our SDRs joined the onboarding team with the influx of demand, and we managed the rest over Slack. It was constant communication. The level of cross-functional collaboration that I witnessed, that our team experienced over that three- to four-day period, was really remarkable. And it’s something that we want to continue beyond this episodic black-swan event.”

Indeed, Arc has been able to maintain this strong cross-functional collaboration. It remains a driving force behind the ongoing growth of the startup. Muir says, “The team leveled up. The business grew. We are on track for 10x plus this year. The momentum hasn’t slowed since March of 2023. The team rose to the occasion and worked cross-functionally in a way that I hadn’t seen at any point in my career.”

The importance of an execution-focused mindset

When it comes to his employees, Muir knows exactly what kind of team member can help Arc succeed: “The defining attribute that I look for when hiring new architects onto the team is this entrepreneurial trait. I look for individuals who have that hustle, that grit.”

Many of Arc’s senior engineers founded their own tech companies. Hiring experienced founders and ensuring open communication within the team ensured swift resolution of issues following SVB’s collapse. Muir explains, “If there was an issue onboarding a customer, it would be resolved within minutes. We would have engineers plugged in directly with sales, they would get on the phone with the customer to make sure the onboarding process was seamless.”

Effective team communication also enables Arc to meet customer expectations and needs, especially around product design. “We were spinning up new products, and that insight came directly from those conversations and inbound emails from customers saying, ‘Hey, how can I max out FDIC coverage? How can I diversify my cash today across multiple banks, not just one?’ We spun up that feature set within hours and days of SVB’s collapse, and that was purely driven by live market feedback.”

Muir’s steadfast approach significantly impacts Arc’s continued success, advocating for a mirrored mindset within his team. It’s something that he looks for during the hiring process. “I am a very execution-driven operator,” he says. “I believe that there are such things as really smart people and really good ideas, but ultimately what sets you up for success is putting your head down, working hard, and executing. You can have the best idea in the world but without grit, perseverance, and pure execution, you are never going to succeed. So in our case, that’s one of the key elements we look for.”