What startup founders and treasury teams should know about SVB and banking resilience
The turmoil surrounding Silicon Valley Bank highlighted vulnerabilities that affect startups, VCs, and financial services more broadly. Beyond headlines, the most useful takeaway is how to build banking resilience: practical steps founders and finance teams can implement to reduce concentration risk, protect runway, and maintain operational continuity.
Why this matters
Startups frequently concentrate large amounts of cash with a single banking partner for convenience and relationship reasons. When a bank faces stress, access to deposits, lines of credit, and payment rails can be disrupted quickly. That can imperil payroll, vendor payments, and fundraising negotiations. Understanding the mechanics behind bank runs, deposit insurance limits, and liquidity risk helps teams make smarter treasury decisions.
Key lessons and practical actions
1. Diversify deposits
– Keep conservative amounts in any one institution relative to official deposit insurance coverage. If you regularly hold significant cash, spread balances across several banks or use sweep services that move funds into multiple insured bank accounts.
– Consider a mix of operating accounts, short-term treasury managed funds, and money market funds to balance liquidity and yield.
2. Know your insurance limits and protections
– Familiarize yourself with deposit insurance rules and how they apply to business accounts.
Understand when funds are insured and when they’re exposed. When in doubt, consult your bank relationship manager or external counsel experienced in banking regulations.
3. Maintain multiple banking relationships
– Establish at least one backup bank well before an emergency. That reduces friction if you need to move payroll or wire funds quickly.
– Keep required KYC documents updated and maintain small test accounts at backup banks so you can scale relationships rapidly.
4. Reassess treasury policies and runway assumptions
– Stress-test the cash runway under scenarios where access to a primary bank is limited for several days or weeks. Identify critical payments and prioritize them.
– Build and practice an emergency treasury playbook that covers wire approvals, signatory changes, and vendor communications.
5. Use credit lines and diversified liquidity sources
– A committed credit facility can be a life-saver when deposits are temporarily inaccessible. Consider standby credit, revenue-based credit, or convertible notes as backup liquidity.
– Explore corporate card programs with extended payment terms to smooth short-term cash needs.
6. Improve visibility and monitoring
– Implement daily cash reporting and consolidated dashboards that show balances across banks and accounts. Faster visibility enables quicker decisions when market conditions shift.
– Automate alerts for balances that exceed insurance thresholds or when large outflows are scheduled.
7.
Maintain transparent communication with stakeholders
– Be proactive with employees, investors, and vendors if there’s a banking disruption. Clear, calm communication reduces panic and protects relationships.
– Keep investors informed about contingency plans and any decisions that affect runway.
Alternative solutions to consider
– Treasury management platforms that aggregate accounts and sweep funds into multiple banks
– Corporate money market funds for daily liquidity with professional management
– Community banks or credit unions as additional deposit destinations
– Fintechs offering insured custody solutions through partner banks
The broader takeaway
Events at a single bank underscored that operational convenience should not substitute for prudent risk management. For startups and growth companies, a thoughtful treasury strategy that emphasizes diversification, preparedness, and clear processes turns banking from a single point of failure into a managed component of business continuity. Regularly revisit your approach—what worked during stable times may not be sufficient in a stress scenario. Adjusting now can protect your team, suppliers, and strategic plans against future surprises.
