What the SVB episode means for startups, investors, and treasury teams
Silicon Valley Bank (SVB) became a focal point for entrepreneurs, investors, and policymakers, and the ripple effects are still shaping how companies manage cash, banking relationships, and financial risk. Whether you run a pre-seed startup or a fast-scaling venture-backed firm, the experience around SVB offers practical lessons that should be part of any treasury playbook today.
Why it mattered
The situation highlighted concentration risk: many startups kept a large share of working capital with a single bank that specialized in the innovation ecosystem. When liquidity stress met market-value declines in interest-rate sensitive assets, a run on deposits accelerated troubles. That combination exposed how quickly operational friction and capital access can escalate financial stress for otherwise healthy companies.
Top takeaways for startups and scaleups
– Diversify deposit exposure: Avoid keeping a majority of operating cash at one institution. Use multiple banks, sweep accounts, or cash-management platforms to spread balances across institutions and reduce counterparty concentration.
– Understand deposit insurance thresholds: Standard deposit insurance protects a set amount per depositor per bank. That limit can leave large corporate accounts exposed unless funds are structured across banks or legal entities.
– Reassess cash and investment allocation: High-yield duration risk can erode liquidity if markets move. Consider laddered short-term instruments, money market funds with institutional liquidity features, and conservative allocations for runway-critical cash.
– Maintain lines of credit: A committed credit facility, even a modest one, can act as a bridge during deposit disruptions or timing mismatches. Negotiate covenants and draw terms well before you need them.
– Improve visibility and forecasting: Frequent cash forecasting and scenario modeling let you spot stress early. Real-time treasury dashboards and weekly runway reviews should be standard for funded companies.
Practical treasury actions to implement now
– Open accounts at at least two unrelated banks, including a relationship with a regional or national institution and a community bank or credit union where appropriate.
– Use insured sweep services or multiple account structures to maximize deposit protection without sacrificing liquidity.
– Keep a portion of runway in ultra-short-term, highly liquid instruments; avoid locking all working capital into long-duration securities.
– Test access to capital: periodically confirm that online banking credentials, wire limits, and ACH arrangements function across all accounts.
– Document contingency plans: assign decision-makers, identify alternate payment rails, and set trigger points for fund movement.
Bank partner selection: beyond rates
When choosing banking partners, evaluate stability factors, not just pricing.
Look for strong capitalization, transparent balance-sheet practices, reliable treasury services, and a proactive client support model. For venture-backed companies, a bank experienced with startup cycles and funding events can smooth payroll and capital call mechanics, but balance that specialty with counterparty diversification.
Regulatory and market context
Regulators and market participants have increased focus on liquidity management and resolution planning for banks serving concentrated client segments. Expect continued scrutiny of asset-liability management and more conservative liquidity practices across the industry.
For companies, that means banking relationships and cash strategies should be revisited regularly rather than set and forgotten.
Actionable next step
Schedule a treasury review this week: map where all operating funds sit, run a 90- to 180-day stress scenario, and implement at least one diversification or liquidity measure. Small operational changes now can dramatically reduce risk and give founders and CFOs greater confidence through uncertainty.