How SVB changed the playbook for startup banking and what founders should do next
Recent turmoil at SVB has reshaped how startups, VCs, and corporate treasuries think about banking relationships, liquidity and risk. Beyond headlines, the practical lessons are straightforward and actionable: diversify deposit exposure, tighten cash management, and build crisis-ready governance.
Why SVB matters to startups and VCs
SVB was a niche bank deeply embedded in the innovation ecosystem. That close fit made it essential for many startups, who routed payroll, venture deposits and debt facilities through a single provider.
When that relationship became unstable, the result was immediate disruption: payroll concerns, interrupted wire activity, and frantic investor outreach. The episode exposed concentration risk and the fragile link between operational banking and business continuity.
Key lessons for founders and finance leaders
– Diversify banking partners: Keep at least two active bank relationships—one primary for day-to-day operations and a secondary for payroll and emergency funds.
Spread large cash balances across multiple insured institutions or account ownership categories to maximize protection under deposit insurance rules.
– Monitor uninsured deposits: Many startups carry far more cash than deposit insurance covers. Treat uninsured funds as a counterparty exposure and limit single-bank concentration.
– Build a liquidity runway buffer: Aim for a longer cash runway than initially planned.
Stress-test payroll and vendor obligations under multiple adverse scenarios, including frozen account access.
– Use sweep and ladder strategies: Automatic sweep accounts, short-term Treasury bills, and laddered money market instruments can improve yield while keeping funds relatively liquid and distributed.
– Maintain clear investor communications: Prepare templates and protocols to inform investors if banking disruptions occur. Quick, transparent updates reduce panic and enable coordinated support (e.g., bridge funding).
– Create a crisis playbook: Define roles, escalation paths, and contingency steps (e.g., alternate payroll processors, emergency capital lines). Run tabletop exercises periodically so teams can act fast under pressure.
What boards and CFOs should demand
– Regular liquidity reporting: Daily cash positions and weekly 90-day runway forecasts should be standard for high-burn businesses.
– Counterparty limits: Set explicit exposure caps for any single financial institution and review them with external auditors or advisors.
– Independent review of cash management: Outsourced Treasury advisory or an external audit of deposit strategy can reveal blind spots.
What banks and regulators can take away
The episode highlighted the importance of sound asset-liability management and clear communication during stress. Banks serving sectors with concentrated customers should align liquidity planning with their clients’ cash profiles.
Regulators can prioritize early-warning systems and clarity around resolution mechanisms to prevent runs and protect the wider economy.
Practical checklist for immediate action
– Open a secondary bank account and verify ACH/wire functionality.
– Reconcile current deposits against insurance thresholds and redistribute excess.
– Implement a minimum runway target and update hiring/spend plans accordingly.
– Establish payroll contingencies with a trusted payroll provider or secondary bank.
– Document and practice a crisis response plan with board-level sign-off.
The shift in behavior from the SVB episode will be lasting. Startups and their backers now view treasury operations as strategic, not administrative. Treat cash management as a core competency: diversify relationships, enforce strict limits, and prepare for stress.
That approach protects operations, preserves optionality, and helps teams focus on growth rather than firefighting when financial shocks occur.