Silicon Valley Bank: Lessons for Startups, VCs, and Treasury Teams
Silicon Valley Bank (SVB) has been a central player in the startup ecosystem for many years, known for catering to venture-backed companies, offering specialized lending, and connecting founders with investors.
Recent disruptions tied to bank stability highlighted structural risks in a concentrated banking model and prompted a widespread rethink of how startups and investors manage cash, banking relationships, and contingency planning.
Why it matters
When a core financial partner faces distress, the impact multiplies quickly for companies that keep large balances, rely on payroll disbursements, or depend on credit lines tied to that bank.
The episode raised awareness about uninsured deposits, liquidity runs, and the importance of asset-liability management — not just for banks, but for every business that depends on a single financial institution.
Practical steps to protect company cash
– Diversify deposits: Spread operating cash across multiple banks to reduce exposure to any single institution’s failure or operational issues. Use bank account sweep features to manage idle cash across insured accounts.
– Understand deposit insurance limits: Know what portion of company balances are covered by deposit insurance and structure accounts to maximize protection where possible.
– Use short-term government securities and money market funds: These instruments can offer liquidity and reduce concentration risk while preserving capital.
Work with a trusted custodian or treasury advisor to execute and monitor these holdings.
– Maintain a liquidity runway: Plan for extended cash needs by holding at least several months of runway in liquid, accessible accounts, and by lining up backstop financing before it’s needed.
– Negotiate clear credit lines: Ensure that any credit commitments include explicit terms on availability and covenants, and consider alternative sources such as venture debt providers or committed credit facilities from multiple lenders.
Treasury and operational readiness
Treasury teams should document critical processes for payroll, accounts payable, and capital calls so operations can be shifted quickly if a banking partner becomes unavailable. Regularly test cutover scenarios and maintain up-to-date signatories and access credentials. Automate bank notifications and account reconciliations to spot anomalies early.
Relationship management with banks and investors
Banks that specialize in startups offer value beyond deposits, including specialized lending products, introductions to investors, and sector expertise.
Preserve these relationships, but treat them as one piece of a broader financial strategy. Communicate proactively with investors and the board about banking exposure and contingency plans; transparent updates build confidence and reduce panic should a problem arise.
Regulatory and market responses
Regulators and market participants have tightened focus on concentration risk, interest-rate sensitivity, and the transparency of bank balance sheets. Many institutions are revising risk-management practices and stress-testing scenarios to account for rapid withdrawals and funding shocks. Companies should watch how these changes affect banking access, lending terms, and deposit pricing.
Key takeaways
SVB’s prominence in the startup ecosystem made its challenges highly visible, but the lessons apply to companies of all sizes. Protecting cash, diversifying banking relationships, strengthening treasury operations, and maintaining clear communication channels are practical actions that reduce vulnerability. Treat bank selection and deposit strategy as strategic decisions, not just administrative tasks, and keep contingency plans current so the business can move quickly if circumstances change.