Silicon Valley Bank: What founders and finance teams should learn from the disruption
The disruption at Silicon Valley Bank sent shockwaves through the startup ecosystem and the broader startup-focused banking market. Beyond headlines, the episode underscores durable lessons about liquidity, deposit protection, and how companies — and banks — manage interest-rate and liquidity risk.
Why it mattered
SVB served a concentrated client base of startups, venture firms, and tech companies. That concentration, combined with a bond portfolio sensitive to rising interest rates and rapid deposit outflows, created a mismatch between asset liquidity and liabilities. When many clients needed immediate access to cash at once, the strain became visible — and costly for customers who relied on a single banking relationship.
Concrete takeaways for startups and small businesses
– Diversify bank relationships: Spread operating funds across multiple banks to reduce exposure to any single institution. Use a primary bank for day-to-day operations and secondary relationships for payroll and emergency access.
– Maximize deposit protection: Understand federal deposit insurance rules and how they apply to your accounts.
If you hold cash above insured limits, talk to your banker about insured sweep options, the ICS (insured cash sweep) network, or brokered deposit services that extend protection.
– Use treasury tools: Sweep accounts, money market funds, and short-term treasuries can provide liquidity while earning yield. Evaluate operational ease and withdrawal timing to ensure funds are available when needed.
– Maintain a clear runway: Prioritize cash forecasting and stress testing scenarios where revenue slows or bills accelerate. Having a contingency plan for several months of runway avoids rushed fundraising or last-minute asset sales.
– Convert some deposits to credit lines: Establish committed credit facilities or access to venture debt before you need them. An undrawn line of credit can be a liquidity lifeline without diluting ownership.
– Communicate with stakeholders: Transparent updates to employees, investors, and vendors reduce panic during banking disruptions and can open doors to bridge financing or operational support.
Practical steps banks and finance teams can take now
– Review account architecture: Consider segregating payroll accounts, tax reserves, and operating cash into different institutions or account types to ensure critical obligations are protected.
– Explore banking alternatives: Regional banks, credit unions, and fintech firms offer varying degrees of flexibility and insurance structures.
Community-based institutions and purpose-driven lenders may provide faster, more personal service.
– Talk to a specialist: Treasury management advisors, CPA firms, and corporate finance lawyers can design structures that balance yield, access, and insurance coverage.
What banks should learn
The episode highlighted the importance of asset-liability management, transparent client communication, and robust contingency planning. Banks that serve niche industries should stress-test liquidity scenarios tied to client concentration and offer straightforward, well-explained solutions to protect customer deposits.
The bottom line
The SVB disruption is a reminder that liquidity and diversification matter as much as revenue growth. Companies should treat cash management as strategic — not just operational — and adopt simple, practical measures to reduce bank-concentration risk. Review account protections, set up backup banking relationships, and build a cash plan that withstands sudden market stress to keep operations running smoothly under pressure.
