What Startups and VCs Learned from the SVB Shock
The turmoil around SVB forced founders, investors, and treasury teams to rethink how they manage cash and banking relationships.
For many companies that relied heavily on a single banking partner, the episode exposed concentration risk and the practical limits of deposit insurance.
The lessons that emerged are practical, actionable, and relevant for any organization that wants to protect runway and preserve operational continuity.
Diversify banking relationships
Keeping all cash at one institution concentrates operational and counterparty risk. Splitting deposits across multiple banks reduces the chance that a single bank event will freeze payroll, vendor payments, or investor wiring.
Use a primary bank for day-to-day operations and secondary banks for payroll, reserves, and emergency liquidity.
Understand deposit insurance and uninsured exposure
Deposit insurance covers accounts up to a set limit, leaving larger balances uninsured. Companies with substantial cash balances should structure accounts and ownership to maximize insured coverage, or use sweep accounts and insured cash management services. Awareness of which funds are insured vs uninsured matters during a stress event.
Manage asset-liability and interest-rate risk
Banks that heavily invest customer deposits in long-dated securities can be vulnerable to rising interest rates if those assets are marked down and capital erodes. For corporate treasuries, the takeaway is to analyze the duration and liquidity of counterparties’ investments, and to keep a clear view of how interest rate shifts could affect access to deposits and credit lines.
Build contingency liquidity plans
A written contingency plan that anticipates a sudden bank restriction can save valuable time.
Plan for multiple scenarios: temporary access limits, longer withdrawal freezes, or sudden needs for payroll and vendor payments. Key elements include pre-authorized transfer arrangements, a prioritized list of expenses, access to backup lines of credit, and a quick process for moving funds between institutions.
Use multiple liquidity tools
Beyond traditional bank accounts, companies can use money market funds, treasury management platforms, and insured sweep products to spread risk. Short-term treasury bills or high-quality commercial paper can offer a balance between yield and liquidity. Venture-backed firms should also consider bridge financing options and pre-negotiated lines that can be tapped under stress.
Communicate proactively with stakeholders
Clear, calm communication with employees, investors, and suppliers prevents panic and preserves trust during uncertain times. Update payroll teams and vendors on contingency payment methods, and tell investors what steps are underway to secure liquidity. Transparent timelines and action items help avoid rumors and operational disruption.
Revisit covenant and financing terms
Term sheets and debt agreements often include covenants tied to liquidity and bank relationships.
Reassess these clauses with legal and finance advisors to ensure they don’t create unintended constraints during a banking disruption. Consider adding flexibility around qualified financial institutions and acceptable collateral.
Adopt stronger treasury governance
Centralize treasury decision-making with clear roles, limits, and approval paths. Regularly stress-test cash positions under adverse scenarios and set alert thresholds for balance changes and transfers. Frequent, simple reporting to leadership helps detect issues earlier.
The broader effect on the ecosystem
The event accelerated adoption of best practices across startups and investors: more diversified cash management, cautious evaluation of bank exposures, and contingency financing planning. For many organizations, the takeaway is straightforward—robust liquidity management is not just prudent accounting; it’s essential operational risk control.
Operational continuity depends less on optimism and more on planning. Companies that treat cash like a strategic asset, with multiple protective layers and rehearsed contingency plans, are far better prepared to weather unexpected banking disruptions.