The disruption around SVB forced a wide re-think of how startups, VCs, and small businesses manage cash and bank relationships. Beyond headlines, the episode highlights enduring risks: deposit concentration, interest-rate exposure, and limited contingency planning. That wake-up call is an opportunity to strengthen treasury practices and protect runway.
What went wrong — in plain terms
– Heavy reliance on one banking partner left many companies exposed when access to deposits tightened.
– A portfolio of longer-duration assets lost value as rates moved higher, reducing liquidity value quickly.
– Rapid withdrawals can outpace a bank’s ability to sell assets without realizing losses, intensifying strain.
Key lessons for startups and high-growth firms
– Diversify deposit exposure.
Relying on a single bank concentrates operational and counterparty risk. Spread cash among several banks or use insured sweep options to reduce uninsured balances.
– Match asset duration to liquidity needs. Short-term cash should be parked in highly liquid instruments — money market funds, treasury bills, or short-dated deposits — rather than long-duration securities.
– Monitor uninsured deposit levels. Know how much of your cash exceeds insurance limits and take steps to mitigate that exposure.
– Maintain clear lines of credit. A committed credit facility or venture debt line can be a vital backstop to preserve payroll and operations during funding delays.
– Communicate proactively. Keep investors, employees, and vendors informed about cash strategy and contingency plans to maintain confidence.
Practical steps to harden your cash management
– Create a cash dashboard that tracks bank balances, insured vs. uninsured amounts, near-term outflows, and runway in months. Update it weekly.
– Use multiple banks: combine a primary operating bank with secondary accounts at regional or national banks and an online bank for excess liquidity.
– Employ sweep accounts or deposit networks to move idle cash into insured buckets automatically.
– Consider short-term government securities and prime money market funds for excess cash — they offer liquidity and lower duration risk than long-term bonds.
– Negotiate committed facilities with lenders early; don’t wait until a crisis to seek credit.
Choosing a banking partner: a quick checklist
– Financial strength and capitalization.
– Breadth of services (treasury, payroll, lending) and quality of relationship management.
– Technology and API support for automated cash operations.
– Speed of access to deposits and clarity on operational limits.
– Transparency about how customer deposits are invested and liquidity policies.
Communication and contingency planning
Have a written contingency plan covering scenarios such as bank access restrictions, failed payroll, or abrupt cash runway compression.
Assign roles for who will communicate with the bank, investors, payroll provider, and staff. Practice the plan with tabletop exercises so responses are swift under pressure.
The broader takeaway is simple: liquidity and operational resilience matter as much as growth. By diversifying banking relationships, shortening asset duration, maintaining credit backstops, and rehearsing contingency plans, companies can protect their runway and operate with confidence even when markets are turbulent.