Silicon Valley Bank (SVB) has long been synonymous with startup banking, venture capital relationships, and specialized financial services for technology and life-sciences companies.
The bank’s story prompted a rethink across the startup ecosystem about how companies manage cash, choose banking partners, and balance growth with liquidity risk.
Why SVB mattered
SVB built a niche by offering tailored lending, treasury, and venture debt solutions for high-growth companies that traditional banks often avoided. That specialization made it a central hub for many founders, investors, and accelerators. When strains appeared in one institution with outsized ties to a single ecosystem, the ripple effects revealed how concentrated banking relationships can amplify systemic risk for startups and investors alike.
Key lessons for startups and finance teams
– Avoid deposit concentration: Keeping all operating cash at one institution exposes a company to the bank-specific risk of failure or operational disruption. Spread cash across multiple banks or use sweep mechanisms to reduce uninsured deposits.
– Understand coverage limits: Federal deposit insurance protects up to a standard limit per depositor, per bank, per ownership category. For balances above that threshold, consider structuring accounts across institutions or using insured cash sweep services offered by many commercial banks.
– Diversify cash vehicles: High-quality short-term instruments—like government-backed securities, treasury bills, and institutional money market funds—offer alternatives to large bank deposits. Evaluate liquidity needs carefully before locking funds into less-liquid options.
– Maintain lines of credit: A committed credit facility, even a modest one, provides a buffer when revenue timing or unexpected outflows create short-term pressure. Lenders value strong banking relationships and transparent communication about runway and burn.
– Stress-test cashflow: Model multiple scenarios for revenue shortfalls or delayed financings.
Forecasting runway with conservative assumptions helps prioritize cost controls and timing for fundraising.
What founders and CFOs should negotiate with banks
– Multiple access points: Ensure you can move money fast via ACH, wire, and online portals. Confirm procedures for signing authority changes and emergency access.
– Sweep and deposit network options: Ask whether the bank participates in programs that distribute excess deposits to partner banks while preserving the customer relationship.
– Credit availability: Clarify covenants, amortization schedules, and triggers that could affect access to lines of credit during downturns.
How the broader market adapted
The episode triggered renewed interest in specialized banking solutions for startups, such as fintech cash-management platforms, insured sweep programs, and banks that offer broader geographic and depositor diversification. Investors, accelerators, and CFO networks increasingly encourage portfolio companies to adopt conservative cash management policies and to document contingency plans.
A pragmatic approach going forward
For startups the takeaway is simple: optimize for resilience. Robust treasury practices don’t just protect cash; they preserve optionality—time to hire, to pivot, and to raise capital under better terms. Building diversified banking relationships, maintaining accessible credit lines, and institutionalizing stress testing are practical steps that reduce fragility without sacrificing growth.
Savvy founders and finance leaders treat banking strategy as part of their risk-management toolkit. By combining careful governance, diversified cash placement, and proactive lender communication, companies can navigate uncertainty with greater confidence and protect the runway that powers innovation.