Silicon Valley Bank (SVB) reshaped startup banking for decades, but its dramatic troubles serve as a lasting reminder about concentration risk, liquidity management, and the trade-offs of niche banking relationships. For founders, CFOs, and investors, the event continues to influence how tech companies handle cash, manage banking partners, and prepare for stress.
What made SVB different
SVB built its brand by specializing in venture-backed companies. That specialization delivered clear advantages: industry familiarity, flexible credit for young companies, introductions to investors, and an understanding of startup cash cycles. Those benefits made it natural for founders to centralize deposits and payroll with a single trusted partner. The downside: when that partner faltered, many companies faced operational headaches almost instantly.
Key lessons for companies
– Diversify deposits: Avoid keeping all operating cash at one institution. Spreading funds across multiple banks helps ensure that more of a company’s cash remains accessible and within deposit insurance limits if a bank faces distress.
– Use sweep and custody solutions: Automated sweep accounts, treasury management platforms, and insured custody arrangements can extend protection beyond standard deposit limits while keeping money liquid and working.
– Maintain committed liquidity: A committed credit facility or revolving line of credit can be a lifeline. Negotiate covenant-light terms where possible and consider multiple sources—bank lines, venture debt, and investor standby funding.
– Stress-test cash flow: Regularly run downside scenarios that assume delayed funding rounds, reduced revenue, or sudden withdrawals. Know your runway under conservative assumptions and plan capital decisions accordingly.
– Communication is critical: If a bank issue arises, proactively communicate with employees, vendors, and investors. Clear messaging about payroll, vendor payments, and contingency plans reduces panic and preserves reputation.
How banks and regulators responded
The fallout prompted tighter scrutiny across the banking and financial ecosystem.
Banks revisited liquidity management practices and contingency planning, while regulators increased focus on deposit concentration, interest-rate risk, and the supervision of banks with large uninsured deposit bases.
For companies, this translated into a broader set of banking options and more attention to treasury risk from both providers and clients.
Trade-offs of niche banking vs. national banks
Niche banks that understand startups often offer bespoke credit and faster decision-making—valuable for high-growth companies.
National banks provide scale, broader product suites, and perceived stability. Many companies now blend both approaches: preserve relationships with specialized banks for sector expertise while maintaining primary operating accounts and critical payroll funding with larger institutions to minimize disruption risk.
Practical steps treasury teams can take now
– Set deposit policies aligned with insurance limits and assess counterparty risk quarterly.
– Implement a three-tier cash architecture: immediate operating cash, short-term liquidity (treasuries, commercial paper, MMMFs), and strategic reserves.
– Use treasury management tools for real-time visibility and automations for payments, sweeps, and alerts.
– Revisit insurance and custodial options to protect excess cash while balancing yield and liquidity needs.
– Train finance and HR teams on contingency payroll procedures, including backup signatories and alternative funding routes.
The lasting impact
The SVB episode reshaped how startups think about banking relationships, risk management, and operational resilience.
Specialized banking remains valuable, but the consensus is clear: expertise should not replace basic safeguards.
Strong treasury practices, diversified banking partners, and proactive scenario planning are now part of standard playbooks for companies that want to grow without putting liquidity at unnecessary risk.